VA, USDA, FHA and IHCDA all say “Absolutely Not!”. Each of these entities has an option in place to let a person buy a home now, even if they don’t have savings set aside for a down payment. Here are the highlights of what they offer:
· VA – VA is a term used to reference loans guaranteed by the Department of Veterans Affairs. If you or your spouse is a Veteran, this can be an excellent option. It offers a great interest rate, no monthly private mortgage insurance (PMI), and no down payment.
· USDA – USDA stands for the United States Department of Agriculture. Among other things, the USDA guarantees mortgage loans made in rural areas. That guarantee allows for 100% financing on these homes. The interest rates are great too, and the PMI is cheap. To see if a property is USDA eligible, just enter the address on USDA’s website: http://tinyurl.com/69aafc.
· FHA – The Federal Housing Administration, known as FHA, insures mortgages made under their guidelines. This insurance comes along with more flexible rules, one of which relates to the down payment. FHA does require a 3.5% down payment, but that 3.5% can be a gift from a family member. If you have a family member willing to give you the money, you can buy now without having to save the down payment up yourself.
· IHCDA – my favorite option currently is the Next Home program by IHCDA. IHCDA is the Indiana Housing and Community Development Authority, which is a government branch that focuses on promoting home ownership in Indiana. Their newest program, the Next Home program, provides 4% in down payment assistance to the qualified buyer using FHA financing. This 4% can cover the full down payment and leave a bit extra to go toward closing costs as well. You can learn more about it through my Next Home educational video, found here: http://www.southbendhomeloan.com/#ihcdaSo what is all this telling us? It’s telling us that HOMEBUYERS HAVE OPTIONS. Just because a buyer doesn’t have money in the bank right now, it doesn’t mean they can’t buy a home. They just need to be working with a lender who can explore all the options out there and find one that will work for them.