In part one of this two-part blog series, we went over some of the basics on low down payment options for those on the mortgage market. There are several specific programs designed to help buyers obtain mortgages without gutting their savings for a large down payment, including several that are easy to qualify for even with imperfect credit.
At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer numerous home loan options, from mortgages for first-time homebuyers to mortgage refinances, reverse mortgages and more. Today’s part two of our series will go over a few additional mortgage programs available for those looking for a low down payment, including a couple you may not have heard of.
Backed by the US Department of Agriculture, the USDA loan is another example of a loan program that often allows buyers to achieve no down payment in many cases. The credit requirements are a bit stricter than something like an FHA loan: You must have a score of at least 640 in most cases for automatic approval.
Generally, USDA loans are meant for those in rural areas. In other cases, they’ll be given to those who will be helping settle or develop such areas anew. They come with 30-year terms in most cases.
Conventional 97 Loans
As we noted in part one, the conventional loan is the one type where 20% down is generally preferred – and where you’ll likely have to pay private mortgage insurance if you aren’t able to obtain this number. As we discussed as well, paying PMI isn’t necessarily a bad option.
However, there is another program known as the Conventional 97 Loan Program. The “97” in the title refers to 97% of the down payment being covered, requiring only 3% down from the buyer. In addition, the entire down payment in a Conventional 97 loan can come from gifted funds in many cases.
Provided by Fannie Mae, the HomeReady mortgage is an option that actually allows buyers to get in the market for rates below the current average. It also assists with mortgage insurance and underwriting areas, and even allows for multiple people living in the same home to become qualified and approved simultaneously. There are several additional benefits of this program if you qualify, which our loan officers will help you determine.
Finally, for buyers with higher credit scores, the piggyback loan program is also offered. This is technically two loans in one, and they are offered with a unique 80/10/10 structure.
What does that mean? At closing, the buyer brings a down payment of 10% of the purchase price. The remaining loan is split into two parts – the larger chunk of 80% is a conventional loan, usually via Fannie Mae or Freddie Mac and at current rates. The other 10%, then, is a second mortgage, usually a home equity loan or home equity line of credit. Essentially, this second mortgage “piggybacks” on the first and helps buyers obtain excellent pricing and a limited down payment.
For more on options for a low mortgage down payment, or to learn about any of our mortgage loan programs or services, speak to the staff at Altius Mortgage today.