No Down Payment? Now Worries!

Are you shut out of the housing market if you don’t have a huge chunk of cash to give the lender for a down payment? Believe it or not, zero to low down payment mortgages are still available, and there are ways you can get into that home with little cash out of your pocket.

No Down Payment: U.S. Department of Agriculture

The USDA offers the Rural Development home loan program, which requires no down payment. It offers two types of loans, and both require that the home be located in a USDA-designated rural area.

Basic qualifications include a reasonable credit history, income limitations, the vow to occupy the home as your primary residence, and proof of U.S. citizenship.

No Down Payment: VA Loan

The United States Department of Veterans Affairs-backed mortgage comes with several attractive features, and foremost among them is that there is no down payment requirement.

You will need to pay a funding fee, but it can be wrapped into the loan amount. You can learn more about eligibility requirements on the VA’s website.

No Down Payment: Down Payment Assistance

Many federal, state, and local agencies provide down payment assistance, in the form of loans or grants, to homebuyers. Federal programs include Good Neighbor Next Door, which is specific to borrowers who are firefighters, law enforcement officers, pre-kindergarten through 12th-grade teachers, and emergency medical technicians. It offers up to 50 percent off the list price of the home.

Low Down Payment: FHA

The most popular loan program for first-time buyers, the FHA-backed loan has gone through some changes over the past several years. Most recently, the program has changed its mortgage insurance requirement so that you must retain this insurance for the life of the loan.

With a conventional loan, on the other hand, you can dump PMI when you reach 20 percent equity in the home.

At any rate, if the FHA Program is what you want, you’ll pay either 3.5 percent or 10 percent of the loan amount as the down payment, depending on your financial picture and the lender’s requirements.

Low Down Payment: Fannie Mae

Fannie Mae offers a program called My Community Mortgage ® that features a 3 percent down payment for first-time homebuyers.

The program is restricted to those who have no ownership interest in any other residential dwelling, and you must live in the new home as your primary residence.

Freddie Mac offers a similar program, called Home Possible.

With decent credit and a steady job history, there is no reason you can’t jump into the home market. We’re happy to share with you what we know about these programs.