If you feel stuck in an apartment or a rental house because all your money is going to rent. The good news is that there are awesome programs out there that let you break the chains holding you down as “tenant” and allows you exchange that title for “homeowner”.
Purchase Your Dream House With a USDA Loan
First introduced in 2014, this loans purpose is to “improve the economy and quality of life in rural America” They allow you to borrow the entire purchase price with no money down and USDA loan are not just for areas filled with fields and green pastures. They are available in smaller towns with traditional neighborhoods throughout the United States.
To find out more about where these loans are available in your area, visit the USDA government website. You will find information regarding approved areas based on your city and state. You can also find out specific income eligibility for your area.
An FHA Loan Requires Little Down and Protects You From Buying a Money Pit
Although FHA Loans require an affordable down payment (usually 3.5 to 5 percent down) they do not have area restrictions like the USDA Loan. As long as the house is in good condition, there is a good chance it will qualify for an FHA loan.
One advantage of an FHA home loan is the FHA inspection. It is more comprehensive than the normal house inspection and can point out defects that must be fixed prior to the loan closing. The thorough inspection can help you avoid buying a money pit.
The VA Loan is Not Just For The Active Military
VA Loans require no money down. You are able to negotiate closing costs by asking the seller to assist by paying these costs for you. This means that you can become a homeowner with virtually no money.
To qualify you must meet certain income and employment guidelines. You also must meet the requirements for military service or be the spouse of someone that qualifies. Talk to a VA-approved lender for more information.
Consider a Loan Assumption
Some loans, such as VA and FHA loans are assumable. Although assuming a loan has not been a popular option for several years, they will gain in popularity in the future. Why? Because right now no one needs to assume a loan due to the low-interest rates. But as interest rates rise in the future, assuming a loan at a 3.5% interest rate when current rates are 6% will be very appealing.
The downside with this type of mortgage, is that it may require a larger amount to be financed if the seller has a significant amount of equity in the home. Still, they are worth keeping on your radar.
Purchasing the House You Rent (Lease to Own or Land Contract)
If you are renting a house and want to buy it you may want to talk to the owner about a Lease to Own or Land Contract. This type of purchase is perfect for anyone that wants to purchase a house, but doesn’t quite have the downpayment needed, or is in the process of rebuilding credit (such as after a divorce or bankruptcy).
Typically, a Lease to Own requires a small down payment and an agreement regarding how much of the rent payment will go, towards purchasing the home. You and your landlord will also agree upon how long the rent to own period will last. After that time expires, you apply for a mortgage to complete the purchase. This allows you to apply for a mortgage, when you have more chance of approval, after rebuilding your credit.
A Navy Federal Loan is Not a VA Loan
The Navy Federal Credit Union is similar to the VA Loan, but the funding fee is less than VA funding fees. Typically, all military funding fees can be financed so this is also a 100% financed loan that requires no money down.
The Navy loan is only available to members of the Navy Federal Credit Union. Admittance to this credit union is more strict than a normal credit union and the most common members are military personnel. However, this membership is extended to some family members of military personnel, some civilian employees of the military and employees in the U.S. Department of Defense.
Mortgage Insurance Makes Up for Missing Downpayment Funds
If you are willing to pay Private Mortgage Insurance (PMI), many mortgage brokers work with lenders, that will allow you to put down 10 percent instead of the traditional 20 percent. These loans have advantages and disadvantages.
An advantage is less money down and the ability to drop the PMI once you own 20 percent of your home. The disadvantage is the additional payment that is tacked on to your normal mortgage payment. This amount can be as much as 10 percent of the mortgage payment.
If you know someone that is willing to back you on your home purchase, they can purchase the home on your behalf and then become your lender. This scenario can be a win-win. You get that home you had your eye on and they get paid interest on the amount they let you borrow. You can also avoid PMI when going this route.
Many first time home buyers, find this type of assistance with parents and grandparents who have the funds to pay cash for the home.
If It’s Your First Home You Are in Luck With First-Time Home Buyer Programs
There are many first time home buyer programs out there. A simple internet search will return a plethora of programs. There are local programs, state programs and federal programs. There are also programs offered by individual banks and mortgage companies.
These programs vary in the amount of assistance they offer. For more information on first time home buyer programs in your area contact a local mortgage broker.
Credit Union Financing is Available to Most
If your local bank says no to a mortgage don’t take that as a final answer. Many credit unions have less stringent guidelines for qualification on a home loan. Credit Unions also often offer home loans with as little as five to ten percent down.
Before giving up, check with your local credit unions for program specifics and eligibility requirements for their home loans. Many credit unions only require a deposit account for membership in their credit union.
To find out more about these programs and other ones that could be an option for you, contact a local mortgage broker. You may be closer to owning a home than you think.