Post written by Renae Harris, Belgrade Lender
Have you dreamt of buying your own home, but didn’t think it was possible because you don’t have 20% of the purchase price to contribute as a down payment?
You may be surprised to learn that while 20% down used to be a common requirement for purchasing a home, there are several available home loan options that allow for little or no down payment.
One of my favorite loan programs is the Single Family Housing Guaranteed Loan provided by USDA/Rural Development through approved partner lenders like Stockman Bank.
This loan program, commonly referred to as the RD Loan, allows for $0 down payment for approved borrowers purchasing a primary residence in eligible rural areas.
Another great $0 down program is the VA-guaranteed loan. These loans are available to eligible Veterans for the purchase of their primary residence.
They offer competitive interest rates with no requirement for monthly mortgage insurance. Like the RD loan, the VA home loan is provided by private lenders, like your local Stockman Bank.
If you’re not a Veteran and not shopping in a rural area, you might be a great candidate for an FHA loan. This type of loan is insured by the Federal Housing Administration and provided by FHA approved lenders.
A homebuyer can get an FHA loan with as little as 3.5% down. The 3.5% can come from a variety of sources including your own savings, a gift from a family member or from a down payment assistance program.
Contrary to popular belief, government-backed loans aren’t the only options for low down payment mortgages.
In fact, the conventional loan is available to qualified borrowers with as little as 3% down.
With the conventional loan, homebuyers may be able to avoid high, upfront funding fees and permanent (life of the loan) mortgage insurance.
While private mortgage insurance is still required for borrowers with less than 20% down, it’s cancellable at your request when the loan balance reaches 80% of the home value or will drop off automatically when the balance reaches 78%. Contact your lender for additional details or to submit a request for removal.
In addition to these great loan programs, many lenders are partnered with local organizations that offer a variety of down payment assistance options, usually in the form of a second mortgage with low or no monthly payments.
At Stockman Bank, we’re proud to offer several down payment assistance options through our partnerships with local organizations like Montana Board of Housing, Human Resource Development Council (HRDC), and NeighborWorks Montana.
So, you may not have a 20% down payment sitting in your savings account, but now you know that you may not need it.
With the many low down and no down payment programs available, you’re likely closer to owning your own home than you thought. Contact your Stockman Bank real estate lender today to discuss your homeownership goals and find out if you qualify.