Buying a Home with Little, or No, Money Down
By Kristi Vaughan
With interest rates at or near record lows it is no wonder homeownership is on the rise. But how do you get in on the tide if you haven’t had the time or extra income to save the traditional 20 percent down payment?
To keep the American dream going, the federal government and private lenders have developed several solutions to this dilemma.
First-time homebuyer programs
One simple answer is to check with local banks, housing authorities and other community organizations to see what type of first-time homebuyer programs might be available. Such programs provide education on the ramifications of home ownership and they often are required first steps in obtaining a mortgage with little or no money down.
To find a program near you, check the federal department of Housing and Urban Development’s Local Home Buying Programs Web site. You also may consider working with a HUD-approved Housing Counseling Agency.
Federal loan programs
There are two main sources of federal mortgage programs: HUD’s Federal Housing Administration and the Veteran’s Administration. FHA loans are the most widely available since VA loans also require proof of military service.
FHA loans - The Federal Housing Administration helps make homeownership a possibility by providing private lenders with mortgage insurance, thus enabling the private lenders to make loans to borrowers they otherwise would not qualify. The FHA has several low, or no down payment programs available, each with different requirements. Check with your bank or community housing agency to see what is available in your area and what the limits are.
VA loans - The Veteran’s Administration makes low-interest mortgage loans to qualified veterans, active duty personnel and some spouses. A downpayment is not required as long as the purchase price of the house is not more than what the VA determines to be a reasonable value for the property.
USDA loans - The US Department of Agriculture, through its Rural Housing Service also offers no downpayment housing loans to qualified buyers in rural areas.
Special HUD programs
In an effort to strengthen neighborhoods, HUD provides homeownership incentives to encourage law enforcement officers and teachers to live in selected areas. HUD has special mortgage programs for qualified individuals whereby they can buy selected HUD homes for a 50 percent discount from list price with only a $100 downpayment.
These are private companies that work to provide low cost mortgage programs across the nation. Both companies offer mortgages for the affordable housing market. Your bank or community housing agency can help you locate these programs.
