If you dream of owning a home but are currently renting at today's high rates, saving the required 20 - 30% down payment can be daunting. The small amounts you have left for savings make buying your home seem far away. Fortunately, you may not need 20 - 30% down as required for some conventional mortgages. Other mortgage loan options on the market may get you in your home sooner versus later. Here are a few.
1. FHA Loans
FHA, or Federal Housing Administration loans, can be one of the most accessible loans for new homeowners to qualify for. The easier qualification is based on lower required credit scores and lower down payments than many of the other conventional loans.
FHA loans are attractive to banks and other lenders because they are federally insured. The downside to these loans is that they can sometimes come with higher interest rates, although you can qualify for a fixed-rate or adjustable-rate loan. Your lender may also require you to pay private mortgage insurance or PMI.
2. VA Loans
If you or your spouse have been in the military and did not receive a dishonorable discharge, you may want to explore Veterans Assistance or VA Loans. These loans are guaranteed loan offers that require little or no down payments.
The beauty of these loans is that, unlike FHA loans, your lender will also not require PMI. Not having to pay PMI could save you several hundred dollars per month.
Once you qualify for a VA loan, the program will issue you a Certificate of Eligibility, or COE. You then take the COE to your lender to show you qualify. You still have to meet the credit and income qualifications which can vary from lender to lender.
3. USDA Loans
If you do not meet the income requirements for other loans, you may qualify for a USDA loan. These loans issued by the U.S. Department of Agriculture are explicitly designed for low-income applicants.
USDA loans are only available in some rural regions and have criteria often not seen with other types of financing. For example,
- You must be without safe housing
- You must be unable to get funding from other sources
- Your home must be less than 2000 square feet
These are only a few of the requirements. There are others that the lender will discuss with you in detail to see if you qualify.
Homeownership is not outside your reach. You must know where to look to qualify.
For more information about mortgages, contact a local company.Share