Updated: 9/29/2010 11:24 AM ET|
Mortgages that require little down
Once again, you can buy a house without a lot upfront -- or even with no down payment. Here are 5 options for potential homeowners who are short on cash.
Homebuyers with little money for down payments are finding more home loans available for low down payments or even nothing down. These mortgages are becoming more common even as the country recovers from a housing bust made worse by the popularity of low-down-payment mortgages during the housing boom.
The Federal Housing Administration insures loans with small down payments. And private mortgage insurers have lowered their down-payment requirements.
Here are a few options for borrowers seeking low-down-payment and zero-down-payment home mortgages.
No down payment
VA loans: The Veterans Affairs Department guarantees no-down-payment mortgages for qualified veterans. 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.
The VA funding fee varies, depending on whether the veteran served in the regular military or in the Reserves or National Guard, and whether it's the veteran's first VA loan or a subsequent one. The funding fee can be as low as 2.15% or as high as 3.3%.
Navy Federal Credit Union: The credit union, the nation's largest in assets and membership, offers 100% financing (up to $650,000) to qualified members for buying primary homes. Credit union eligibility is restricted to members of the military, some civilian employees of the military and U.S. Department of Defense, and family members.
Navy Federal resumed zero-down financing this year after a hiatus of a couple of years. Barbara Sheehan, Navy Federal's assistant vice president for mortgage products, says when members of the military are transferred, they sometimes own houses whose values have fallen, wiping out equity.
"Some people had to take losses to sell their houses, so to have to start over and save the money again for a down payment is really difficult," she says.
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.
Department of Agriculture: The department's Rural Development mortgage guarantee program is so popular that it ran out of money this past spring. Just in time for summer homebuying season, the department promised an additional $2.5 billion in loan guarantees on the assumption that Congress would soon appropriate the money.
"That's the cat's meow, my favorite loan program," says Jeff Tufford, a consultant for Monarch Mortgage Consulting in Grand Blanc, Mich.
Some borrowers are surprised to find that Rural Development loans aren't confined to farmland.
"It's not all rural," Tufford says.
Grand Blanc is a suburb of Flint. There are nearby communities, such as Fenton and Davison, where "no one would walk there and say this is a rural area, but the USDA can do loans there."
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