Low/No Down Payment Programs
The less money you have to put down on a property narrows your options and increases your cost to homeownership. While harder to obtain financing it is not impossible. The following are programs to consider if you have less than 20% of the purchase price to put down on the property.
State Mortgage Bond Program
Massachusetts offers low down payment loans to first time homebuyers, veterans and individuals buying in certain targeted cities. These programs often offer the most favorable terms for low down payment loans. There are restrictions relative to maximum household income, homebuyer education and credit qualifying. You may go to MASSHOUSING.com to learn about the programs and see if you qualify. Please look for a qualified lender in your loan officer profile search to apply for this program.
Rural Development Loans
The USDA provides no money down home financing to families buying in rural areas through certain lenders. Like the Bond Program, rural development loans have certain limitations. While it is intended for rural areas on single family homes only, you might be surprised how many areas are considered rural. The attached link can determine if you qualify for this program.http://www.rd.usda.gov/programs-services/single-family-housing-guaranteed-loan-program
Veterans are able to take advantage of no money down financing if they have eligibility. The attached link describes the program and eligibility requirements. http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp
This of the most popular and least restrictive low down payment loan. Homebuyers must have at least 3.5% of the sales price for a down payment. For more information you can go to this link:http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home
Traditional financing known as conventional loans are less restrictive and typically offer the most competitive terms if you qualify. Conventional loans require 5% of a down payment. If you put less than 20% down conventional loans require private mortgage insurance. This is a cost to you that provides the lender insurance coverage in the event you do not pay them back. The cost of mortgage insurance is based upon how much money you have to put down and your credit score. The higher the credit score and down payment the lower the cost. If you have 5% to put down be sure you get a quote for conventional loan options to compare against alternative loan options.
Down Payment Assistance Programs
Typically combined with FHA loans and Bond programs, these programs provide assistance with your down payment through second mortgage loans from interested non-profit agencies. If you are having trouble getting enough money for a down payment, don’t qualify as a veteran or rural development but still want to buy a home ask about/research DPA options in your area. http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/np/sfhdap01
If you are a first time homebuyer ask your lender if they offer any incentives for first time buyers. Banks and some mortgage companies make an extra effort to offer specialized programs for first time buyers as part of their required Community Reinvestment (CRA).