How to apply for mortgage loans with a low down payment?

Buying or building a home comes with lots of excitement. However, saving until you can afford a down payment to qualify for a conventional mortgage can be challenging. Luckily, best mortgage lenders in Utah are offering mortgage loans with a low down payment. With the low down payment mortgage, you do not have to wait until you have saved enough money to pay the 20% down payment. Consequently, you are able to fast-track your dream of owning a home.

In this post, we look at different ways of applying for mortgage loans with a low down payment. We will start by covering the low down payment mortgage options, and look at some frequently asked questions. Thus, if you have been looking to have more knowledge on low down payment mortgages, this is the right information page. 

The FHA Home Loan 

The Federal Housing Administration home loan program started amidst the foreclosures and the mortgage defaults that happened in the early 20th century. Since inception, The Federal Housing Administration program has been at the forefront in helping the low-income earners access to mortgages to finance their home-buying ambitions. This is through the FHA Home Loan.

The FHA home loan is a mortgage loan with a low down payment. Requiring only 3.5% down payment, the FHA home loan is available to qualified mortgage borrowers, through the best mortgage lenders in Utah. Ideally, the Federal Housing Administration protects the mortgage lenders in case the mortgage borrower defaults. The FHA is thus a program that focuses on stimulating the housing market. This is through making the mortgage loans more affordable for persons who have a low down payment and less than stellar credit score. To qualify for the low down payment mortgage, the applicant must have a minimum FICO score of 580. However, applicants with a credit score that is lower than 580 qualify for the FHA low down payment mortgage given they are able to raise 10% down payment. 

HomeReady® Mortgage

Designed to help more borrowers become homeowners, the HomeReady® Mortgage is available to the mortgage borrowers who can make up to a 3% down payment. The HomeReady® Mortgage has no restrictions on how one can raise the 3% down payment. Thus, borrowers have the privilege of raising the low down payment through receiving gifts, using cash in hand, and through the down payment assistance programs. 

However, the HomeReady® Mortgage requires that borrowers who raise less than 20% down payment, will have to pay private mortgage insurance. The HomeReady® Mortgage enables the borrowers to enjoy reduced mortgage insurance requirements that in most cases results in cost savings compared to the FHA home loan or the conventional mortgage. 

However, the HomeReady® Mortgage is intended for the low to moderate-income borrowers. In many circumstances, the mortgage expands eligibility in low-income communities. A unique feature of the HomeReady® Mortgage is the ability to combine the income with other persons living in the home. 

The Conventional 97 Mortgage

The conventional 97 program is a mortgage loan with a low down payment. It is aimed at helping first-time homebuyers or those looking for mortgage for building a home. The program is offered by Fannie Mae and requires that the borrowers come up with only a 3% down payment. This creates a mortgage balance of only 97%, hence the name conventional 97 loan program.  The borrowers do not need a perfect credit score to qualify for the mortgage. However, at least one borrower must be a first-time homebuyer. Moreover, the mortgage does not come with an income limit, while the debt-to-income ratio is 43%. 

We have looked at the mortgage loans with a low down payment. However, some mortgage loans require no down payment. Here are some of the no down payment loans offered by the best mortgage lenders in Utah. 

The VA Loans 

The VA home mortgage is available to military personnel and a surviving spouse. The VA home loan provides 100% financing hence a no down payment mortgage. The Va home loan qualifications vary from one mortgage lender to another. 

The USDA Rural Development Housing loans 

Potential homebuyers looking to purchase homes or build homes in specifically designated rural regions can take advantage of the USDA no down payment home mortgage. Backed by the United States Department of Agriculture, the USDA home loan is meant for remote area residents. 

Here are the Low down payment mortgages FAQs

 

  • Do I have to be a first-time homebuyer to qualify for a low down payment mortgage? 

 

The Conventional 97 home mortgage requires that to qualify, at least one borrower must be a first-time homebuyer. However, the FHA and the HomeReady® mortgage do not have this restriction.

 

  • Are there Income Limits on mortgage loans with a low down payment?

 

Sometimes, mortgage borrowers may be required to provide proof of income. In addition, some mortgage types provide an exclusion from income limitations. 

 

  • Can I get Low Down payment Mortgage with Low Credit?

 

If you meet the other requirements as laid out by your best mortgage lenders in Utah, you may qualify for mortgage loans with low down payment even with a bad credit score. Check with your preferred mortgage borrower whether they accept mortgage borrowers with low credit scores to borrow a mortgage. 

Are you looking to purchase a home but lack the 20% down payment to qualify for a conventional home loan? Take advantage of the mortgage loans with a low down payment. 

 

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