There are a variety of special loan programs out there
that allow small down payments of other benefits. Many programs are
designed for first-time home buyers, while others focus on borrowers
with low incomes.
If you need help buying a home, you should ask your
local bank or lending institution if they offer any special mortgage
programs. State housing agencies, HUD offices and Consumer Credit
Counseling Services can help refer you to lenders that will assist
you.
There are a few programs that are fairly popular:
Department of Veterans Affairs (VA) mortgages
VA mortgages are backed, not issued, by the
government. This mortgage programs helps veterans and their spouses
purchase homes. No down payment is usually required and there are
other benefits that help the buyer.
Federal Housing Administration (FHA) mortgages
Many first-time home buyers turn to FHA loans. These
mortgages are backed by the U.S. government and administered by the
Department of Housing and Urban Development (HUD). They feature
easier credit qualifications, lower down payments and favorable
underwriting standards. HUD ensures the lenders full payment if the
borrower defaults. This reduces the risk to the lender.
Rural Housing Service mortgages
The Department of Agriculture helps farmers and other
qualified borrowers with low t o moderate incomes in buying property
in rural areas or small towns. The borrower must be unable to obtain
a mortgage elsewhere. The mortgage is usually low-interest and has
no down payment.
State and local government-backed mortgages
Many state and local housing agencies sponsor mortgage
programs designed to help first-time home buyers purchase homes. The
buyer must meet specific income guidelines or be willing to buy in a
specific area. The mortgages usually have low down payment
requirements, subsidized interest rates and help with closing
costs.
Down payment assistance programs
The FHA requires buyers to make down payments of at
least 3%, but allows nonprofit agencies to bestow gifts of
down-payment funds to buyers. There are nonprofit agencies that do
just that - they help the buyer come up with a down payment.
The seller usually agrees to donate a certain amount
of money to the down payment assistance program. The amount is
usually equal to around a 3% down payment. At closing, the program
gives the money to the seller. The seller gives the program a
contribution equal to the down payment plus a processing fee after
the closing. This allows the seller to pay the down payment for the
buyer, which goes around the FHA requirements of where the payment
must come from.
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