Slowly but surely, the housing market is bouncing back. More homes are for sale and more credit is becoming available. In fact, it’s been predicted that the real estate market is only going to continue gaining strength. This is great news for first-time homebuyers.
But it may seem like owning your own place is off the radar until you can meet the demands for up-front costs. Stop right there! There are many ways first-time purchasers can obtain a loan with little down and little hassle.
The big barrier for many first-time buyers is cash. It takes cash for a down payment, and cash to close. Mortgage lenders are generally looking for buyers that have enough cash to put 20 percent down, but given that the typical home sells for more than $200,000, there are plenty of first-time homebuyers who don’t have the $40,000 or more as a down payment that lenders prefer.
Here’s the good news: there are now alternatives loan programs that don’t require a 20% down payment and programs that eliminate a lot of the up-front costs typically seen with traditional loan options today.
Federal Housing Administration (FHA) insured loans and conventional financing are available with little down. The US Department of Veterans Affairs (VA) guarantees loans so veteran and active military duty borrowers can qualify for mortgages that require no down payment. Here are some options:
- Conventional loans are available with as little as 3 percent down, plus something called "private mortgage insurance" or PMI.
- FHA mortgages require an up-front mortgage insurance premium (MIP), plus an annual MIP based on the outstanding loan balance. Mortgages backed by the FHA are available nationwide and typically require just 3.5 percent down.
- VA financing is available for those with qualifying service, such as military personnel, as well as officers in the Public Health Service and the National Oceanic and Atmospheric Administration (NOAA). VA loans are available with nothing down. There is an up-front "guarantee" fee, but no annual insurance cost.
- The Vylla Loan is available for homebuyers of all credit levels and offers a transparent, simplified home loan process with no closing costs or upfront financing fees. It eliminates 100% of loan closing costs for all borrowers.
That means qualified first-time homebuyers can buy a house today instead of waiting years to save enough cash to put 20 percent down.
Happy Hunting! See part 2 in this series and learn about available mortgage assistance programs.