During the housing crisis over the last several years, we saw the elimination of low down payment or even no down payment mortgage loans. While this has made it harder for some to get approved for a mortgage, there are still a few options out there for low down payments or down payment assistance.
FHA mortgages originated in the 1930’s at the height of another housing and economic crisis. Technically, FHA mortgages were the first “subprime” loans because buyers only had to put a 3% down payment on the house they were buying. In the 1930’s there were very few mortgage options and buyers usually had to put down 20% or even more if they were buying a house. Today, FHA remains an option for low down payments for buyers. The mortgages are backed by the federal government and you will pay a mortgage insurance premium, but you will only be required to put 3.5% down on your new house and this can include your closing costs. FHA also has flexible qualifying options which makes it an ideal mortgage for first time home buyers or anyone that doesn’t have the perfect financial background.
VA loans are for qualified veterans, reservists, active duty personnel or eligible family members. VA loans have low down payment options and even zero down payment options. There is no mortgage insurance, but you will pay a one-time funding fee that can be financed into your loan or paid at the closing table.
Local community banks may be able to offer mortgages with low down payment options that mortgage companies or bigger banks can’t offer. The reason for this is local banks will portfolio their loans and hold them in house and not sell them on Wall Street. They keep the mortgages in house and service them. Because of this they have flexibility when it comes to the type of loans they offer. The loans are usually approved by a board of directors or the programs are created by the board of directors.
On the flip side, there are some big banks that offer low down payment options and can still sell them on the secondary market like Wall Street, as part of a bundled package. Each big bank is different so it is good to look around to see what your options are when it comes to mortgages at bigger banks.
Down Payment Assistance
Many local communities and counties in Minnesota offer loans for down payment assistance. This is especially true if you are looking to move into a community or neighborhood that is underdeveloped or needs improvement. To find out more about these loans, visit the city or county website where you are going to move.
One of the most important things you can do when trying to buy a new home is to get pre-approved with a qualified mortgage professional that knows the ins and outs of buying a home especially in today’s economic client. We work with several mortgage loan officers that we trust and that have given our clients great deals. If you are ready to make a move and aren’t sure where to start, please give us a call today and we will point you in the right direction!
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