If you think you need to put 20% down on a home, you might want to rethink your approach.
One of the hardest things that especially first time homebuyers deal with is saving up enough funds for that big down payment on a home. Most financial planners recommend that you put 20% for your down payment. As of February 2017, the average median price of a home was $296,200.00. That is $59,240 required for a 20% down payment.
Writer Nichole Odijk-DeMario, contributor to Realtor.com breaks down the various types of loans you may be eligible for that can help land your first home and save you some extra money to furnish it too.
Federal Housing Administration loans
Better known as FHA loans, they only require a down payment of only 3.5%. To be eligible you would need a credit score of at least 580. Scores around 500 can qualify, but the amount needed for a down payment goes up to 10%.
FHA insures mortgages on single family and multifamily homes. It provides the lenders with protection against losses as a result of homeowners defaulting on their mortgage loans. It is an extra expense you will have to consider if you aren’t able to put 20% down.
The last restriction is FHA can limit on how much money you can borrow. It’s usually between 65% and 115% of the median home prices in the surrounding community. Despite these few restrictions and the extra mortgage insurance payments, FHA loans are a great option, especially for first time buyers.
Veterans Affairs loans
VA loans are a fantastic option if either you or your significant other has served in the military. Unlike the FHA loan, VA Loans require 0% down and do not require buyers to pay mortgage insurance. The Department of Veterans Affairs insures the loan on your behalf.
To qualify for a VA loan, you will need to present a certificate of eligibility, proving at least one of the requirements below:
- 90 consecutive days of active duty during wartime or 181 days during peacetime (Aug 2, 1990 through present time).
- At least six years in the National Guard member or reserves.
- If the person applying has been wounded in service, even if you don’t reach the required days of active duty or during peacetime.
- You’re a widow or widower of an active member of the military who died in action or from injuries suffered while on duty.
USDA rural development loans
When you hear the word rural you instantly think the country. With a United State Department of Agriculture loan, 0% money down loans are offered to home buyers that qualify to having low or moderate income. It can depend on where you live depending on how the moderate threshold is. For instance, from the article the amount in San Francisco was $141,000 for an individual.
While a lot of the eligible properties are typically in rural regions, the program covers 97% of the United States. Check out USDA.gov to see if particular addresses qualify.
State and local programs
Move over federal government, there are plenty state and local programs that offer home loan assistance. Throughout the country there are over 2000 programs including here in Minnesota. These programs do have income requirements and usually require a first time home buyers class. To find local programs in your area check out the NSCHA website.
Where to start?
Contact a mortgage consultant, lender or Cedar Association Realty to determine not only what your dream home is but what you can afford. Now that you are aware of other services available besides conventional 20% loans, you can save and contribute your money to furnishing or remodeling your new home.