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Tuesday, April 1, 2014

First Time Buyers – Can I buy a house with little to nothing down?


Question - I want to buy a house but I don’t have enough for a down payment. Are there programs that could help me?

First, let’s establish whether your desire to buy a house is realistic. What is your credit score? If you don’t know, go find out. There are places that you can go to get your credit report and your credit score free. If your credit score is below 640, don’t worry about buying a house right now; worry instead about fixing your credit. It will probably be a year or two before you are ready to buy a house, depending upon how damaged your Credit Score is right now. There are some programs that will deal with people with scores as low as 580, but most of them carry onerous rates or have other requirements that are difficult to live with.
If your credit is OK and the only thing holding you back is the lack of down payment money, there are several programs options o explore -

If you happen to be a military veteran and you haven’t used your VA benefits already, then check out the programs available through the VA for zero down payment home purchases. There are restrictions and Click here to go to the VA site and rad more about using a VA zero down loan. One caution with VA loans, at least in Michigan, is that any condo or site-condo complex that you may be interested in has to be VA approved. Click here to go to the VA site where you can determine of the complex that you are looking at is on the approved list. There is no way to get a complex on the list after construction is finished. Your mortgage rep should have information on VA programs that his company supports.
requirements, but it’s a great program.

If you are an active duty member of the U.S. Navy, there is a program available to you through the Navy Credit Union. Navy Federal Credit Union, the nation's largest in assets and membership, offers 100 percent financing to qualified members for buying primary homes. Credit union eligibility is restricted to members of the military, some civilian employees of the military and U.S. Department of Defense, and family members.
Navy Federal resumed zero-down financing in 2010 after a hiatus of a couple of years. The credit union's zero-down program is similar to the VA's. One difference is cost: Navy Federal's funding fee of 1.75 percent is less than the VA's funding fees. Click here to read more about that program.

If you are not a veteran, but you are looking in a rural area (more areas than you might expect qualify for that designation), the USDA has a program under its Rural Development Program that allows a buyer to buy with zero down. Yes, this is the same USDA that inspects our meats and other foods. The Rural Development Program for mortgages in under its jurisdiction because it was initially aimed at the rural area where farms are located (or at least that is the best explanation hat I could come up with). As might be expected, this program has restriction and requirements, too. You can click here to read about this program and to see fi the area that you are interested in is classified as rural and whether you qualify for the program. You’ll first have to choose a state, because the definitions for rural vary by state. Check with your mortgage rep to see if that company does USDA loans.

Finally, if you live in Michigan you may qualify for a down payment assistance loan through a program run by
MISHDA – the Michigan State Housing Development Authority.  This is a program that provides interest free loans to qualified home buyers so that they have the money to make the required down payment or pay their closing costs. Here are some bullets to explain the program:
·        
  •       Available with MSHDA's FHA or Rural Development first mortgages (so yu can team it up with the USDA Program for really low mortgage rate).
  •        Funds may be used for down payment, closing costs, prepaid/escrow expenses and a home inspection performed by a qualified home inspector
  •       Zero-interest, non-amortizing loan with no monthly payments
  •        The loan is due upon sale or transfer of the property or if the first mortgage is refinanced or paid in full

Obviously this program, as do all the others mentioned before, has its requirements and restrictions. Click here to read about the MISHDA Program or click here to hear about it from the MISHDA Down Payment Fairy. To see if your state may have a similar program, click here to go to the web site of the National Council of State Housing Authorities.

One option that doesn't involve any help from government agencies is to get a gift from Mom & Dad. With that gift you could look at any of the financing options – Conventional, FHA, USDA and VA; however there are strict underwriting rules about gifts. Click here to read a fairly comprehensive article about gifts for this purpose. It may initial seem like a lot of hassle; but these rules were put into place because of a lot of fraud back in the Great Recession; so, you’ll just have to live with them.


So there it is. The answer to your question is yes (if you qualify and can meet the requirements). Don’t even ask if you can buy a house with zero down and bad credit – that ain't gonna happen in today’s market.  But, if you have good credit and just don’t have the necessary down payment together right now; that doesn't mean that you can’t buy a home. Talk to your mortgage lender about these programs and see if you qualify. If your current lender says that they don’t do these programs, find one that does.

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