Written By: Glenn Michaels, Op-Ed Contributor
As I talk to more and more people it is amazing how much erroneous information is out whereby borrowers must put 20% down in order to buy a home. These people must have read all of the news articles referring to the QM (Qualifying Mortgage) and other press releases referring to the difficulty in obtaining mortgage financing.
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One thing that prevents individuals from purchasing a home is the lack of funds to do so. However there are numerous programs where applicants have to put less than 20% down and can also have a sales concession to assist the borrower close on the home purchase. In addition there are various down payment assistance grant programs to assist a borrower to buy a home.
Below are various everyday common mortgage programs that require less than 20% to buy a home.
The first common mortgage program is the FHA mortgage program. The FHA program requires a borrower to down 3.5% of the sales price and the borrower can obtain a 6% sales concession from the seller of the property to pay their closing costs. The 3.5% down payment very often does not even have to be the borrower’s own funds, These funds can come from gifts, grants, secured loans, the sale of an asset and from an employer. The funds needed to close is often not a problem due to the options available.
The second common mortgage programs are mortgage loans offered by the Veterans Administration (VA). Most honorable discharged veterans of the United States military and active duty members of the United States Military can obtain 100% financing and a 4% sales concession from the seller to assist in the closing of the home.
The third common program is a conventional mortgage program with 5% down with Private Mortgage Insurance. Conventional mortgage programs for a long time the conventional mortgage program allowed 3% down, however this was suspended recently. There is a good chance that 3% down will be coming back since there is a move to make it easier to purchase a home in the near future.
The fourth common programs are mortgage loans issued by the United States Department of Agriculture. These loan allow 100% and are called a “Rural Housing Loan.” Homeowners using the USDA Single Family Housing Guaranteed Loan Program that reside in neighborhoods that don't meet the traditional definition of rural can apply for this mortgage.
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The fifth mortgage program is for renters and homeowners that reside in an area of the United States that were declared by the President of the United States that the area is a federal disaster area. Renters and homeowners that cannot remain or move back into their residence can obtain 100% financing under the FHA’s 203(h) program. Every time you read or hear the news where an area of the United States is severely impacted by a natural disaster and the President makes that declaration more residents fall under the 203(h) program.
Looking at all of the no money down programs and 3% to 3.5% down programs we can definitely state that there are common mortgage programs out there that do not require at least 20% down.
About The Author
Glenn Michaels - As an NAMP® Opinion Editorial Contributor, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
