I bet you still think you need 20% down on your first-time purchase. Well that is just not true. There are many different programs available to all buyers with less than 20% down payment. Below is the list of programs offered to first time homebuyers.
The options available for Conventional vary based on credit score (as do all programs and down payments). The least amount down payment available in a conventional loan is 3%. These programs are really targeted at ambitious first-time homebuyers, with minimal assets to put down. Unlike FHA and USDA, there is no upfront Mortgage Insurance Premium to be paid (Upfront MIP – is to insure the Lender should you choose to stop making payments) Conventional loans with anything 80% loan to value or higher will have a PMI in the monthly mortgage payment. It is a minimal amount and varies lender to lender. This amount falls off automatically at 78% Loan to Value or can be requested to be removed at 80% (more than likely, you will need to pay for another appraisal to request it be taken off sooner). In addition to 3%, if you do not qualify for the least amount down, there are 5%, 10% and 15% options available.
Maybe you do not qualify for a conventional loan. FHA is a wonderful product that offers as little as 3.5% down. This program is target at home buyers who have credit scores as low as 580. With FHA there is an upfront mortgage fee built into the loan amount and monthly mortgage insurance for the life of the loan. The perks are a borrower can become a homeowner while continuing to work on their credit and potentially refinance their loan down the road and work toward dropping their monthly mortgage insurance.
Looking for no down payment? The USDA government loan has a built-in incentive to acquire land in rural areas. The incentive is that there is no down payment required. There are additional factors that go into USDA loans such as the lot needs to be in a USDA eligible area. A 620 is the minimum allowed credit score for this program as well as some other qualifying factors. Just like FHA there an upfront fee built into the loan amount and an annual fee as well.
Another no down payment option that becomes a little more specific is VA Loans. Veterans can request their DD214 and Certificate of Eligibility when applying to see if they qualify for a veteran loan. Most lenders require a minimum of 620 to qualify along with other qualifying factors at the time of application.
Overall, the 20% down is a thing of the past and there are many products available to customers who may not have perfect credit or a major savings they are sitting on. These products help homebuyers get into homes and keep building themselves financially while working towards equity in the home.