Ways To Finance A Home With Little Or No Money Down
There are so many great financing programs available to buyers in our Phoenix Metro market. I am often asked about how much money a buyer needs to have saved in order to purchase a home. The answer may surprise you. You may qualify for a home loan with little or no money down. Most studies show that these loan programs are not for everybody. If you do not have regular income, can’t prove your income source or do not meet certain credit requirements, you may not be eligible. There are qualification requirements for various loan programs, but here are some good options to investigate:
0% Downpayment programs
Even though the vast majority of 0% downpayment programs have evaporated, they do exist for some eligible buyers.
This loan program is available to Navy Federal Credit Union members, which has broad eligibility criteria. Basically, any uniformed or civilian employees of the Department of Defense are eligible to join the credit union (including retirees). Family members of those who are eligible can become members of this credit union to take advantage of this program, too.
- No down payment required
- Fixed-rate terms available
- No Private Mortgage Insurance (PMI) required
- Seller concessions up to 4% allowed
- Jumbo loans amounts available up to $1,000,000
- Refinance options also available (maximum loan-to-value 97%)
If you check out this site, this loan program is available for veterans, active duty personnel, Reseverists/National Guard members and some surviving spouses .
- No downpayment required
- Buyer informed of reasonable value.
- Negotiable interest rate.
- Ability to finance the VA funding fee (plus reduced funding fees with a downpayment of at least 5% and exemption for veterans receiving VA compensation).
- Closing costs are comparable with other financing types (and may be lower).
- No mortgage insurance premiums.
- An assumable mortgage.
- Right to prepay without penalty.
- For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
- VA assistance to veteran borrowers in default due to temporary financial difficulty.
Applicants for this 0% downpayment loan program may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.
- No downpayment required
- Rural areas such as Maricopa, Buckeye, Queen Creek, San Tan Valley, New River and Wickenburg are considered eligible for this program
- No maximum purchase price limitation
- Closing costs can come from any source, including gifts
- Repairs and improvements can be included in the loan
- NOT limited to 1st time buyers
- Fixed 30 year term
1%-3.5% Downpayment Programs
This loan program is available for borrowers who meet standard FHA credit qualifications. There have been recent changes to the FHA credit qualifications. FHA now offers FHA loans for buyers with a FICO score as low as 500, but the downpayment amount is 10%. If a buyer’s FICO score is between 500-580, the downpayment amount is 5% (from FICO 500-580, buyers can not use gifted funds for their downpayment). FHA allows for a 31/43% first mortgage ratio. This means that the buyer’s income and new housing expense (principal, interest, taxes, insurance and HOA fee) can not exceed 31% of the buyer’s income and that the buyer’s total monthly debt (credit cards, student loans, car loans, etc) can not exceed 41% of the buyer’s income. The maximum loan amount is $346,250. You can contact wowloans for bad credit car loans. Getting a luxury car on loan is completely valid, but with this, you must also ensure that your luxury car gets a Luxury car mechanic who can provide it with excellent service. A small error in servicing from an unprofessional or an amateur mechanic and the entire look of the car can go, and you’ll end up losing more money for no reason.
- The borrower is eligible for approximately 96.5% financing (3.5% downpayment)
- The borrower can receive a gift from a family member, for ALL or a portion of the downpayment and closing costs (limitations exist, if your credit score is lower than 580). By obtaining gift funds, you could offset the entire amount of your downpayment and closing costs, allowing you to purchase a home with 0% of your own funds.
- There is 1 local lender, The Lending Company, who has partnered with a non-profit downpayment assistance provider to offer reduced downpayment requirements on FHA loans. The non-profit provides a gift of 2.5% of the downpayment, leaving the buyer’s remaining portion of the downpayment at 1% of the purchase price. There are income limitations and a buyer must have a credit score of at least 640 to qualify.
- This program can be used to purchase or refinance their principal residence.
- There is typically no maximum income limitation for qualifying.
- The borrower is able to finance the upfront mortgage insurance premium into the mortgage. The borrower will also be responsible for paying an annual premium.
- Eligible properties are one-to-four unit structures.
- An FHA 203K program is available for properties needing renovation. The total amount financed can not exceed $346,250. The maximum amount allowed for renovation is $35,000. The $35,000 can be used to repair, renovate or upgrade the home. There is a specific process to navigating through a 203K loan, which involves getting contractor bids, obtaining appraisals, completing the work and contractor payment/work approval.
HomePath financing is available to buyers puchasing a primary residence, second home or investment property currently being sold by Fannie Mae. All buyers must have a minimum 660 credit score. Buyers with a credit score between 620-659 will need to put 20% down.
- Low down payment and flexible mortgage terms
- Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a secured loan from a nonprofit organization, state or local government, or employer
- No appraisal required
- The HomePath Renovation loan is available for investors. The investor must put down 25% and have a minimum credit score of 700.
- No mortgage insurance (the interest rate is slightly higher than on a loan without mortgage insurance)
Buyers purchasing a foreclosed home in the city of Phoenix, AZ. The buyer must be a legal US resident and can’t own (or be on title) on any residential property. There are income limitations (1 person household income max is $55,950, 2 person household income is $63,950, 3 person household income is $71,950, 4 person household income is $79,900, etc.) Debt-to-income ratios are in line with FHA guidelines, which allow for 31/43% first mortgage ratio. This means that the buyer’s income and new housing expense (principal, interest, taxes, insurance and HOA fee) can not exceed 31% of the buyer’s income and that the buyer’s total monthly debt (credit cards, student loans, car loans, etc) can not exceed 41% of the buyer’s income. Check out HouseBuyerNetwork.com if you are selling your property and want to make this process fast and hassle free.
- Buyer must contribute 50% of the required down payment or a minimum of $1,000 (whichever is greater) from personal funds
- The property must be located within the city of Phoenix boundaries
- The property must pass certain inspections and a lead-based paint inspection is required for home built prior to 1978.
- There are 15 and 30 year fixed rate, fully-amortized mortgage terms available
- Property must not exceed 99% of the “as is” appraised value of the property
Do you want to apply for a home loan to see which loans you qualify for? Contact us for our comprehensive preferred lenders list and for more information on these available loan programs.