Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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Low Down Payment Home Loans

How Low Can You Go With Your Down Payment

How Low Can You Go With Your Down Payment

Orange County, CA – It’s no secret that we have seen some incredibly low mortgage rates over the course of the last calendar year. Even though we’re now seeing rates on the rise, we’re still at ‘absurdly low’ levels! Thanks to this situation, the cost of owning a home has dropped tremendously. Home affordability has skyrocketed.

Despite this, prospective home buyers still have challenges, and it’s often the down payment that’s the problem. Thankfully, there are plenty of low down payment mortgages available to help people out. We’ll review conventional, FHA, VA and USDA options below.


FHA sets out guidelines which other loan companies follow. They are known for being liberal in terms of dealing with credit issues, and they also try to look after those struggling with down payments. They require a mere 3.5% down payment. This low down payment can also be gift funded, to make things even better.


Another low down payment mortgage is a 97% conventional loan. This is a Fannie Mae program that only requires 3% down. As long as you have a strong credit score this can often be a less costly option than the FHA. It’s also highly valuable in markets where sellers are less likely to accept FHA offers or for condo’s that lack FHA approval.

Again the 3% can come from gifted funds. The maximum loan size cannot exceed $417,000, no matter what sort of market the home is in. We’re also only talking single unit dwellings for these loans too. Finally you have to opt for a fixed rate mortgage since ARM’s aren’t allowed.


VA mortgages offer 100% financing. Of course, this is limited to military borrowers – ruling most of the population out of this one. Active duty personnel, those with honorable discharges and National Guard members with 6 years service can apply. Intermittent occupancy is permitted. Funding fees will be charged based on first time or subsequent use. These can be paid in cash or financed. But a real bonus is that mortgage insurance is not required on VA loans. That makes this a no down payment program that keeps payments low throughout the life of the loan.


Finally you may be in a position to opt for USDA 100% financing. This is a loan option available in rural counties with population less than 100,000. In addition to no down payment this loan has a small annual fee. There is a one-time funding fee of 2.00% that can be paid in cash or financed into the loan. You can tie in home repair costs and improvements into the loan and there’s no maximum purchase price. Another feature that makes USDA different than the other loans is that they allow you to use appraised equity to cover closing costs. So, if you purchase the home for $200,000 and the value comes in at $205,000, USDA will allow you to apply the $5,000 towards your closing expenses. You will need to increase your loan amount accordingly.

Given all the options it’s always worth talking to someone who is able to advise you financially. You have to take on board your own specific situation before deciding which low down payment option is best for you. Speak to us today and we’ll help you to understand the best way forward for your situation.

Scott Storace

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