So, you want a home? Down Payments
So, you want buy a home?
Options for when you don’t have a down payment.
One problem that arises in the home buying process is the down payment. Generally, the down payment is 20% of the of the purchase price. If you buy a home at $200,000, you would have to have a down payment of $40,000. On top of that don’t forget about closing costs! For a home that you buy for $200,000 you might need $50,000 cash, at least! Who has that?
Luckily different loans are available that make owning a home more affordable and do not require needing the traditional 20% down payment.
These loans are the most utilized loan option in Northern and Central Minnesota. USDA loans are an excellent choice for first time home buyers. Some of the key factors that make a USDA Rural Development loan intriguing to home buyers are:
- No down payment required
- Seller paid closing costs are allowed
A USDA Rural Development loan is an excellent way to purchase your first home but to qualify for this loan there are some guidelines:
- Buildings designed to be used as is
- Cannot be used for income producing dwellings, duplexes or converted rentals.
- Cannot be used on grain bins, silos, dairy/hog farms, and farm service buildings
An FHA loan is a mortgage loan insured by the Federal Housing Authority (FHA). This is another great loan option if you do not have money for a down payment. Generally, with an FHA loan you will need at least a 3.5% down payment. Other key factors include:
- Seller paid closing costs allowed
- Flexible credit standards
- Available to all income levels
Are you or your spouse a veteran? If so, you could be eligible for a VA Loan. VA Loans are offered through the US Department of Veteran Affairs. Some of the key factors that go into a VA Loan are:
- Purchase a home with no down payment and no private mortgage insurance
- Fewer closing costs
- Better terms and interest rates.
With a conventional mortgage there are options available to people who may not have the required 20% down payment. UCB offers long term options and low down payment options are available with certain income restrictions.
Also when thinking about different ways to cover the down payment and closing costs, programs are available. For example, the city of Perham has a program where they will offer a loan to people looking to move to the city of Perham.
If you are looking to own a house but have questions about the down payment or to qualified for a mortgage, do not hesitate to contact our to our loan officers!