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

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Low Down Payment Loan Programs Are Still Here…For Now

Low Down Payment Loan Programs are Still Here Despite Shifting Mortgage Landscape

Low Down Payment Loan Programs are Still Here Despite Shifting Mortgage Landscape

Orange County, CA – As home affordability veers downward due to rising mortgage rates and rising house prices many consumers are wondering if they’ll be able to afford the kind of home they want. They’re seeing new laws like the QM and QRM rules and wonder if they still have a chance to get a home with a low down payment loan program.

The answer is “yes”, if you’re willing to work fast. After all, those rules don’t go into effect until January.

FHA Mortgages

An FHA mortgage is a low down payment loan program that only requires a 3.5% initial investment. Technically, the FHA doesn’t make loans as much as they insure loans, but if a bank can meet the FHA guidelines, the FHA will protect that bank should the borrower fail to pay back the loan. They offer a very low minimum credit score of 620, and still allows higher debt-to-income ratio limits. The FHA does charge money for its insurance, known as mortgage insurance, which adds to your monthly mortgage costs.

The Conventional 97

Fannie Mae offers a low down payment loan program called The Conventional 97, which allows a prospective homeowner to pay a mere 3% down. The loan size cannot be more than $417,000, it must be a single-unit dwelling, and the mortgage must be a fixed-rate mortgage. The minimum credit score you must have to apply is 680. With a little more down, you can also use gift funds, much like an FHA loan. This gives you a conventional loan solution.

VA Mortgages

The VA, like the FHA, insures loans rather than making them. You qualify for a VA insured mortgage if you’re:

  1. An active duty or honorably discharged member of any of the armed services
  2. You’ve spent six years in the Reserves or the National Guard or
  3. The spouse of a service member killed in the line of duty

You’re not even immediately disqualified if you’ve had a bankruptcy or have very poor credit, though it does make it harder to get approved.

USDA Full Financing

The USDA offers a zero-down-payment loan program for low- to moderate-income families that wish to purchase, repair, or assume ownership of a home in a rural area. They do require proof of ability to repay, as well as a credit score of at least 660. The loans are generally restricted to homes of 1,800 square feet or less unless you have specific circumstances (like a very large family).

There are other, private-sector low down payment loan programs that are still going strong — but don’t wait; come January, it may get quite difficult to find a loan that doesn’t require a fat down payment.

Contact us if you have questions about qualifying for a low down payment loan option.

Scott Storace

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