Buying a Home With a Low Down Payment
Buying a home with a low down payment is
very common, especially more so over the last few years.
However, since the beginning of the year in 2007, buying
a home with a no down payment, or a low down payment, is
becoming increasingly more difficult with tougher
lending guidelines, higher interest rates and a tough
real estate market. Therefore, buying a home with a low
down payment is still very possible, just a little more
difficult for borrowers who are on the borderline for
If you are a first time home buyer that is in the market for a new home there are many mortgage programs
available to you that offer low down payment or no down payment. These mortgage programs are
available through FHA, con forming and sub prime lenders.
In order to have a true $0 down payment or a low down payment, you should have the seller pay closing costs in most cases. For first time homebuyers, the seller generally pays 3% of your closing costs. Keep in mind that if the closing costs are less than 3%, you will not receive that money as cash back at closing.
Depending on the loan amount and desired interest rate, you may need or want to have the seller pay up to 6% for some programs. Lower loan amounts will need a higher percentage of closing costs since many costs are fixed regardless of the loan amount. High loan amounts may need lower closing costs for the same reason.
Fannie Mae offers an excellent program called The MyCommunity Program. You can qualify for excellent financing terms with as little as $500 of your own money invested into the transaction.
Many people who are looking to buy a home with a low down payment, or even no down payment, often obtain a combo loan. A combo loan is one of the most common ways to buy a home with little to 0 money down. A combo loan is also referred to as an 80/20 loan, an 80/15 loan, or an 80/10 loan. These mean that you will have two mortgages on the property and the first one will be at 80% of the purchase price and the 2nd mortgage will be at either the 20%, the 15% or the 10% of the purchase price. Combo loans can help you to avoid paying PMI, they can help sometimes to avoid having to escrow for property taxes and insurance and they can often provide an overall lower payment than other financing options.
It is important to note when talking about a no or low down payment mortgage you can still accrue costs associated with the purchase. Often times you will see no closing costs, or no out of pocket expenses paid at closing. These offers should be closely looked at to insure you are not going to be paying money out of your pocket. You should verify the lender is including all costs in their no cost mortgage quote: including appraisal fee's, inspections, Title costs, escrow costs, and tax's.
If you are a Veteran with an honorable discharge, you may qualify for 100% financing with a VA Loan. Contact your mortgage professional for more details.
Buying a home with little or low down payment will result in a higher monthly mortgage payment.
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as soon as possible. Thanks!
Information listed above is to be used for educational purposes only and is not guaranteed
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