Too many consumers think they can't buy a home because they don't have the cash to put 20 percent down on the mortgage. In fact, it's safe to say that the down payment is one of the biggest obstacles to home buying today. And, it doesn't have to be.
The following are four mortgage options that don't require large down payments.
1. Fannie Mae's 3-Percent-Down Mortgage
Launched a few years ago, Fannie Mae's Conventional 97 is a brilliant alternative to the FHA-backed loan. In fact, it is "among the most in-demand programs for today's homebuyers," according to Dan Green at TheMortgageReports.com.
Conventional 97 is what FHA used to be -- ideal for both the first-timer and repeat homebuyer who lacks a large down payment. While borrowers are still required to purchase mortgage insurance, the premiums "are usually less expensive than those of comparable FHA home loans," according to Green.
Best of all, according to Tim Lucas, editor at MyMortgageInsider.com, borrowers can qualify with scores as low as 620 and "gift funds can be used for down payment and closing costs."
2. Freddie Mac HomeOneSM Loan
If your preferred lender isn't among those conventional lenders approved to offer the HomeOne loan from Freddie Mac, it's time to look for another lender.
Like Fannie Mae's loan, it allows first-time homebuyers to achieve the dream of homeownership.
Features include: no income limits, no geographical limits and it allows for the purchase of a single-family home, condo or townhome.
Buyers are required to have at least 3 percent for a down payment and a credit score of at least 620 and first-time buyers, borrowers must agree to attend a buyer education course.
3. Freddie Mac Home Possible®
Freddie Mac offers an alternative to the HomeOne loan and that's the popular Home Possible mortgage. This program is a deal for your lower income buyers who lack a big down payment and require "flexible sources of funds."
These sources can be family members, employer assistance "secondary financing and sweat equity," or a combination of these, according to Freddie Mac's website.
Your buyer's qualifying income (on an annual basis) cannot exceed 80 percent of the AMI.
There's a 3 percent down payment, but unlike other similar programs, a borrower can qualify for 105 percent LTV with Freddie Mac's Affordable Seconds.
4. HomePath Ready Buyer™ Program
Another Fannie Mae program, HomePath Ready Buyer, offers 3 percent down payment assistance for qualified borrowers who agree to participate in an online homebuying course and then purchase a HomePath property.
"The request for closing cost assistance must be made at the initial offer in the HomePath Online Offers system," according to information on the HomePath website.
The buyer must not have owned a home within the past three years, they must agree to reside in the home as their primary residence and take possession within 60 days of closing.
5. USDA Rural Development Loan
The "no money down" option. Buyers need a minimum credit score of 620 and fall into other specific criteria. For both USDA and FHA Loans, the home must also meet certain criteria. This loan is very popular in our area because it allows many buyers to purchase a home with little to no money out of pocket.
There are plenty of other programs out there that will help you purchase a home without a huge down payment. Reach out to me for more information and assistance in deciding which program is right for you. I always have outstanding lenders standing by and ready to take new applications. Let's talk!