Low down payment, no down payment loan options for 2017

Minneapolis, MN:  Just 10-years ago, 30-year fixed rates were 6.125%, and the real estate market was hot. With rising interest rates, 2017 may be a bit more challenging for home buyers. But the biggest challenge for most people who wish to buy a home is down payment.

You do not need 20% down payment to buy a home! I repeat, you do not need 20%. This large down payment myth has been around forever, but it simply isn’t true for the vast majority of people buying their first primary residence. There are many program that allow for no down payment, or low down payment. Some jumbo loans buyers (loans over $424,100 in most parts of the county), as will people buying investment properties will usually need a large down payment. But for the rest of us, there are many low down payment, no down payment loan options for 2017.

First Time home buyers, Down Payment Assistance

First Time Home Buyer programs:

The term first time home buyer program covers a wide net of potential programs and options. To be a first time home buyer, you simply must not have owned a home in the past three-years. If you owned a home in the past, but it has been longer than three-years, you are a first time home buyer again. Some options allow for lower rates, cheaper mortgage insurance, and even down payment assistance. Most come with additional strings attached, like household income requirements, lower debt to income requirements, and that you must take first time home buyer education classes.

FHA Loans:

FHA backed loans are very popular, and only require a small 3.50% down payment. The down payment can be your own money (checking/savings/retirement), a gift from a family member, or can come from a down payment assistance program. FHA loans are more forgiving than other loans, for example allowing just a two-year waiting period if you have a previous bankruptcy, and a three-year waiting period after a previous foreclosure. Maximum loan limits apply based on the medium income of the county the property will be located.  Check FHA Loan Limits

Conventional 97 Loans:

Both Fannie Mae and Freddie Mac offer a 3% down payment program.  The down payment can be your own money (checking/savings/retirement), or a gift from a family member. This is a great program, especially for those with higher credit scores, or homes that need a little TLC that might not pass FHA loan inspections.

Conventional HomeReady™ Loans:

Fannie Mae offers an additional 3% down loan called HomeReady for first time home buyers. You need to take a home buyer education class, but you’ll be rewarded with lower interest rates, and lower mortgage insurance than the standard 3% down conventional loan.

Conventional 95 Loans:

Both Fannie Mae and Freddie Mac offer a basic 5% down payment program.  This is your everyday, plain vanilla mortgage loan available to everyone.

VA Loans (100% financing):

Available for active or retired U.S. Military personal, the VA loan is truly one of the best benefits this country offers for your service. The VA loan is a no down payment program, and also has no mortgage insurance whatsoever. This is a huge savings per month over any other low or no down payment loan. Closing costs can be rolled into the loan, making for a home purchase, that for most people, is about as close to zero money out of pocket to buy a home as you’ll ever get.

USDA Rural Housing (100% financing):

Available to those wishing to buy in more rural areas of the country, the USDA Rural Development loan does not require a down payment. While the loan does have mortgage insurance, the cost is very low compared to other loans.  You need to meet household income, and property location requirements.

Down Payment Assistance:

Down payment assistance comes in many different flavors from neighbors, city, county, and even state programs. Welcome first time home buyers. Apply onlineGenerally these are in the form of a loan that needs to eventually be paid back, but there are a very small number that are actually forgiven if you live in the home a set period (like 9-years or longer). The assistance loan can be combined with a standard loan, like an FHA loan, to be used for down payment. Household income, and property location are common requirements.

The Bottom Line:

If want to own your own home, you have OK or better credit, a stable income, and at least a little money in the bank, by all means, you should apply for a home loan. Your Loan Officer will review your loan application, then go over the various program to see what programs you qualify for, how much house you can buy, what the payments might look like, and finally, how much cash you may, or may not need to put it all together.

Best case, you’ll be in your own home sooner than you thought.  Worse case, your Loan Officer will go over what you need to do to be in position to buy a home in the near future.  Either way, a win win for you.


USDA property eligibility map to change for 2015

USDA loan property eligibility map changing for 2015

The very popular no down payment home loan for rural areas of the country is changing slightly for 2015 throughout the country.

usda-future-eligibility-map“USDA Announcement (posted 12-22-14) indicates President Barack Obama signed the Consolidated and Further Continuing Appropriations Act of 2015 (omnibus spending bill) into law last Tuesday.

While it is long and boring to read, the most important aspect is that USDA loans will implement new property location eligibility maps on February 2nd, 2015. 

The changes will be those already published on the ‘Future Eligible Areas’ maps posted on the USDA eligibility website (USDA Future Eligible Maps), which had be previously announced to go into effect, but had been delayed multiple times.

When checking property eligibility for a USDA loan, be sure to click the future eligibility link, as only applications completed and submitted to the USDA on or before Feb 2nd, 2015 are eligible under the current eligible areas.

Completed applications submitted by your mortgage lender to  USDA after Feb 2nd will be subject to the new ‘Future Eligible Areas’.”

Another reminder about USDA loans is that you can apply with any participating USDA loan lender. You do not need to find or use an actual USDA office. We provide USDA loans in MN, WI, or SD