Every homebuyer wants a low mortgage par rate because it can save them hundreds of…
Do not panic if you are ready to buy a home but do not have a significant amount of change to put toward a down payment. While it is always helpful to have the reserves needed to put down on a home, there are a number of ways that you can get into a house without a lot of money. The professional mortgage lenders in Huntington Beach can help you to figure out how to buy a house with little money down.
Understanding Zero-Down Payment Mortgage Options: A zero-down payment mortgage option puts you in a home with no money down. These types of loans are insured by the federal government, making them less risky for the lender to approve. There are two types of government-backed zero-down payment options: VA loans and USDA loans.
VA loans are designed for active-duty service members, National Guard members, reserves veterans, or surviving spouses of deceased veterans. This type of loan is insured by the Department of Veterans Affairs.
If you live in a rural or suburban area, you may also qualify for a USDA loan. These loans are backed by the United States Department of Agriculture (USDA) in an effort to encourage housing development in those areas outside of big cities.
Low Down Payment Options: You are not completely out of luck if you do not qualify for a VA loan or a USDA loan. Many people will still qualify for a conventional loan through a private lender or through Freddie Mac or Fannie Mae if they are willing to pay the private mortgage insurance (PMI). This PMI is required if the down payment is less than 20% of the total loan. However, you can cancel this PMI once you hit 20% equity in your home. Remember, the average down payment is 6%!
You may also qualify for one of the various FHA loans, provided by the Federal Housing Administration. These loans are available if you are able to provide 3.5% down and can prove that you have a low or moderate-income.
Options for Poor Credit: Poor credit can be a significant stumbling block to prospective homeowners trying to get into a house with not a lot of money to put down. The good news is that you still have options if home ownership is your dream. An FHA loan is a good choice if your credit score is as low as 500.
If your credit score is lower than 500, you will need to be intentional about taking steps to raise this score so that you are more attractive to lenders. You can do this by paying down outstanding debt, removing mistakes from your report, and applying for a secured credit card. If you want to learn more about improving your credit score, check out our video on Instagram @jandjcoastal.
By getting creative with these options, you may find that it is easier than you think to get pre-approved for a mortgage without a hefty down payment.