Let’s face it, it can be difficult to save enough money for a down payment on a home. Not only does it take a strict budget, but patience is a must, and often times is the hardest part (to say the least)! What is one to do if they are financially responsible people, but saving for a down payment would take years in most cases?
This scenario isn’t uncommon here in the Appleton, Oshkosh, Green Bay areas of Wisconsin, or in nearly any other location of the United States for that matter!
Thankfully we recognize the situation, and know that this describes a large portion of the US market. That’s why we have multiple options for those who want to purchase a new home with little to no money down. How? I’m glad you asked…
Here are 3 popular loan programs that can be used to purchase a home with little to no money down. These are also often referred to as a zero down payment mortgage. They are USDA, VA and FHA home loans, each with different benefits for different situations.
The US Department of Agriculture (USDA) home mortgage program is designed to help low to moderate income households who are in an eligible rural area purchase a home. This program is considered a 100% financing mortgage option, or a zero down payment mortgage, used to promote homeownership in less dense rural communities.
Keep in mind that approximately 97% of US land may be eligible for this program, so the definition of “rural” is very broad and not specific to remote areas far from the city. Appleton isn’t eligible but the surrounding areas of Freedom, Sherwood, & west of Greenville are. Oshkosh isn’t eligible but just to the south is along with to the west heading to Winneconne & Omro.
How do you know if you qualify? The most important factor to first determine when considering a USDA loan is the location. Mind you that eligibility requirement on location is very broad. Income levels for a family to qualify needs to be a “moderate” income. The USDA defines a moderate income as up to 115% of the areas median income.
While the zero down payment mortgage option is heavily advertised with the USDA loan, keep in mind that doesn’t mean you don’t have a down payment or aren’t capable of a down payment. In many cases you may very well be able to put some money down, but feel better keeping that saved money set aside for an emergency or other unexpected event.
If you the above scenario fits you, or if you are a moderate income earner with no down payment to purchase a home, and you fall within the eligible locations, you can start building equity now rather than paying rent money that you never see again.
The US Department of Veteran Affairs (VA) home loan is much like the USDA, but available only to US Veterans. Like the USDA home loan program, the VA home loan is a zero money down mortgage program.
This loan program was designed in 1944 to help returning service members purchase a home without the need of a down payment or perfect credit.
Perhaps one of the most attractive benefits of a VA home loan is that the VA home loan doesn’t require PMI (Private Mortgage Insurance). PMI in many cases with most other loan programs lowers your purchasing power since the added cost of insurance is taken into account. Not with a VA loan!
Along with the benefit of no PMI, in most cases they are much easier to qualify for and have excellent interest rate options. Due to the fact that the VA loan is backed by the US government, banks normally have less requirements and restrictions when getting approved for a VA loan.
Those of you who have served time are greatly respected and appreciated. One of the benefits of your courageous service is mortgage programs like the VA home loan. If you’ve served in one way or another, and want to take advantage of excellent rates and a no money down option to purchase your home, then the VA home loan will be a great fit.
The FHA home loan was designed for households who are able to save at least 3.5% for the down payment on their home. While it’s not a zero down payment mortgage, it comes with it’s perks since you have a little bit more skin in the game.
An attractive benefit of using an FHA home loan is that the 3.5% can be gifted to you from another person if necessary. Why would anyone do this? In some cases the interest rates may be a bit more favorable with an FHA loan since a down payment is required, resulting in less risk to the bank lending the money. If you don’t have the full 3.5% down payment, you can have it given to you from a close friend or family member, allowing you to take advantage of some of the benefits offered.
If you have the capability of putting some money down for your home purchase, or you’ve got a close friend or family member willing to gift you the down payment, then you are in a great position to take advantage of the benefits offered by an FHA home loan.
When all is said and done, there are programs available for nearly all scenarios to help you get into your first or 10th home. Why pay money in rent when you could be paying yourself in equity from owning your home? Talk to a mortgage lender now to see your options and determine your best route to home ownership.Not sure which option would fit you best? Talk to a qualified mortgage specialist to determine where to start.