June 9th, 2016 5:24 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 payment.
The Federal Housing Administration, or FHA, insures loans with small down
payments, and private mortgage insurers have relaxed their down-payment
requirements. It's even possible to get a mortgage today with no money down.
The nation's biggest credit union offers "zero-down" mortgages. The
Department of Veterans Affairs, or VA, and the Department of Agriculture, or
USDA, guarantee home loans with no down payments.
Following are a few options for borrowers seeking
low-down-payment and zero-down-payment home mortgages.
The 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.
For 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% or as high as 3.3%.
1st-time purchasers making no down payment, the funding fee is 2.15% for
members or veterans of the regulator military, and 2.4% for those who qualify
through service in the Reserves or National Guard.
Navy Federal Credit Union, the nation's largest in assets and
membership, offers 100% 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
The credit union's zero-down program is similar to the VA's. One
difference is cost: Navy Federal's funding fee of 1.75% is less than the VA's
The 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
"That's the cat's meow, my favorite loan program,"
says Jeff Tufford, mortgage consultant for Epic Mortgage Group in Grand Blanc,
Some borrowers are surprised to find that Rural Development
loans aren't confined to farmland.
"It's not all rural," Tufford says.
The USDA has apps 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
The USDA mortgage comes from a bank, and there is no mortgage
insurance. Instead, the USDA levies a 2% upfront guarantee fee, which can be
rolled into the loan amount, and an annual guarantee fee of 0.5% of the loan
Qualified borrowers can make down payments as low as 3% with
private mortgage insurance, or PMI. For most borrowers, PMI costs less than FHA
mortgage insurance. But PMI has stricter credit requirements.
PMI has another edge over FHA: Once your mortgage balance is
under 80% 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.
With a minimum down payment of 3.5%, the FHA is the
low-down-payment option that's available to people with imperfect credit
The FHA charges an upfront premium of 1.75% of the mortgage
amount. On a 30-year loan with the minimum down payment, there's an annual
premium of 0.85% of the mortgage amount, or $850 a year for each $100,000
borrowed -- about $71 a month.