August 6th, 2017 8:42 AM by Jackie A. Graves, President
with little money for a down payment are
finding more home loans available for a low down payment or even no down
are a few options for borrowers seeking low-down-payment and zero-down-payment
Department of Veterans Affairs, or VA, guarantees purchase mortgages with no
required down payment for qualified veterans, active-duty service members and
certain members of the National Guard and Reserves. Private lenders originate
VA loans, which the VA guarantees. There is no mortgage insurance. The borrower
pays a funding fee, which can be rolled into the loan amount.
purchase and construction loans, the VA funding fee varies, depending on the
size of the down payment, whether the borrower served or serves in the regular
military or in the Reserves or National Guard, and whether it's the veteran's
first VA loan or a subsequent loan. The funding fee can be as low as 1.25
percent or as high as 3.3 percent.
first-time purchasers making no down payment, the funding fee is 2.15 percent
for members or veterans of the regulator military, and 2.4 percent for those
who qualify through service in the Reserves or National Guard.
Federal Credit Union, the nation's largest in assets and membership, offers 100
percent financing to qualified members who buy primary homes. Navy Federal
eligibility is restricted to members of the military, some civilian employees
of the military and U.S. Department of Defense, and family members.
credit union's zero-down program is similar to the VA's. One difference is
cost: Navy Federal's funding fee of 1.75 percent is less than the VA's funding
(Department of Agriculture, or) USDA's Rural Development mortgage guarantee
program is so popular that it has been known to run out of money before the end
of the fiscal year.
borrowers are surprised to find that Rural Development loans aren't confined to
The USDA has maps on its
website that highlight eligible areas. In addition to geographical
limits, the USDA program has restrictions on household income, and it is
intended for first-time buyers, although there are exceptions.
USDA mortgage comes from a bank, and there is no mortgage insurance. Instead,
the USDA levies a 1 percent upfront guarantee fee, which can be rolled into the
loan amount, and an annual guarantee fee of 0.35 percent of the loan balance.
borrowers can make down payments as low as 3 percent with private mortgage
insurance, or PMI. For most borrowers, PMI costs less than Federal Housing
Administration mortgage insurance. But PMI has stricter credit requirements.
has another edge over FHA: Once your mortgage balance is under 80 percent of
the home's value, you can cancel PMI. You can't get rid of FHA insurance unless
you refinance into a non-FHA loan.
a minimum down payment of 3.5 percent, the FHA is the low-down-payment option
that's available to people with imperfect credit histories.
FHA charges an upfront premium of 1.75 percent of the mortgage amount. On a
30-year loan with the minimum down payment, there's an annual premium of 0.8
percent of the mortgage amount, or $800 a year for each $100,000 borrowed --
$66.67 a month for a $100,000 loan.
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