New homeowners are liable to get nervous when it comes to applying for a mortgage. Many people have trouble sifting through the real estate terminology and the legal requirements of buying a home. However, if there was one aspect of buying a home that makes people the most nervous, it’s probably the downpayment.
If making a downpayment is stressing you out, you should know there are many ways to obtain downpayment assistance, or even secure a mortgage without any downpayment at all. So, if you’re a buyer who wants to make a very low down payment or avoid one altogether and maintain maximum liquidity, check out some of the options outlined below.
State Bond Loans
In general, State Bond Loans help buyers secure a loan at below-market interest rates. The exact rates offered through State Bond Loans vary, but they generally increase long-term affordability and decrease monthly home payments. These bonds are available through local housing agencies, which sell tax-exempt mortgage revenue bonds and then use the income from these sales to offer below-market rate loans to buyers. This type of loan looks a little different depending on the state you’re living in.
The Washington State Housing Finance Commission is the organization that offers State Bond Loans to Washington State residents. The WSHFC offers a number of options for homeowners looking for downpayment assistance. The Home Advantage downpayment assistance program allows eligible buyers to secure a loan totaling as much as 4.00% of the total loan amount in all counties. There is a 0 percent interest rate for this loan, and payment is deferred for 30 years.
Additional downpayment assistance programs exist for buyers living in specific areas of the state. For example, the Seattle Downpayment Assistance Loan Program pairs with the Home Advantage program to provide as much as $45,000 in downpayment assistance. Payments for this program will be deferred for 30 years with a 3 percent simple interest rate. To qualify for this program, the buyer must meet specific income requirements and must be purchasing a home within Seattle’s city limits.
Veteran’s Affairs Loans
Through the Department of Veteran’s Affairs, active duty members, qualified veterans, and some members of the Reserves or National guard can obtain guaranteed purchase mortgages. These loans are begun by private lenders and then guaranteed by the VA. There is no mortgage insurance for this loan, and the borrower pays a funding fee of between 1.25-3.3 percent, depending the borrower’s military status and the number of VA loans he or she has acquired in the past.
United States Department of Agriculture Rural Development
The USDA’s Rural Development mortgage guarantee program is one of the most popular in the country. The program is meant for first-time buyers and restricted-income households. This loan requires no downpayment; instead, borrowers pay an upfront 1 percent guarantee fee, and an annual fee totaling .35 percent of the remaining loan balance. Also, this loan is not restricted to farmland or remote areas, but can be obtained in any geographical region as identified on the USDA’s website.
Federal Housing Association Low Rates
The Federal Housing Association doesn’t offer zero downpayment options, but it does offer extremely low downpayments to qualifying borrowers. The FHA charges a minimum down payment of 3.5 percent, as well as an upfront premium of 1.75 percent of the mortgage. Overall, FHA loans are ideal options for borrowers with less than perfect credit histories, and they could even be good options for buyers seeking to improve their credit scores.
As the above options demonstrate, it’s perfectly possible for many homebuyers to obtain a mortgage with no downpayment or a very modest downpayment. Additionally, while borrowers should always manage their finances and loans carefully, it’s not necessary to have a perfect credit score or a small fortune saved to qualify for a mortgage. To find the perfect affordable mortgage, contact Cody Touchette (MLO 83216) with Caliber Home Loans, Pickett Street’s preferred lender.