How to Buy a Home Without a 20% Down Payment
One of the first things you’ll hear when you start considering homeownership is that you’ll need a hefty chunk of change upfront. Most financial planners recommend putting down a 20% down payment. On the current national median home price of $306,700, that comes to $61,340. And that’s serious money. Here on the Big Island along the Kona Coast the average median price is hovering around $575,000. Consider your options!
If you don’t happen to have that kind of cash on hand, you’re not alone! Thankfully, there are other ways to go about buying a home that don’t require you to put 20% down, like the following:
-Federal Housing Administration loans: The Federal Housing Administration requires a down payment of only 3.5%. Compared to 20%, that’s pretty sweet-but these government-backed mortgages aren’t for everyone. To be eligible, you’ll need a decent credit score, of at least 580. Scores as low as 500 may qualify, but then you’ll need to put 10% down. Another stipulation is that you’ll have to pay mortgage insurance, an extra fee that’s required on home loans where less than 20% has been put down. There are also limits on how much money you can borrow, with a minimum and maximum between 65% and 115% of the median home price in an area-on average between $271,050 and $625,000. Still, in spite of these restrictions, these loans are plentiful and a boon to home buyers, particularly those who are entering the housing market for the first time.
-VA loans: If you or your spouse has served in the military, Uncle Sam has your back! You may quality for a Veterans Affairs loan, which requires 0% down and, unlike FHA loans, no mortgage insurance, since the Department of Veterans Affairs insures the loan on your behalf. To get a VA loan, you’ll need to present a certificate of eligibility, proving one of the following requirements: 90 consecutive days of active duty during wartime, or 181 days during peacetime. Six years in the National Guard member or reserves. You were wounded in service, even if you served for less than the specified time.You’re a widow or widowers of a member of the military forces who died in action or from injuries suffered while on duty.
-USDA rural development loans:
The United States Department of Agriculture also offers 0% money-down loans to home buyers who qualify as having low or moderate income. And the threshold for “moderate” can be quite high depending on where you live; in San Francisco, it amounts to $141,000for an individual. And while eligible properties are typically in rural regions where space isn’t at a premium, this doesn’t necessarily relegate you to the sticks. A full 97% of the United States is covered under USDA loans; check whether any address or area is covered at USDA.gov. State and local home buyer programs. The federal government isn’t the only one offering down payment assistance. In fact, there are 2,290 down payment programs across the country that offer financial assistance, kicking in an average of $17,766, according to one study. Generally, these programs have income limitations and require you to take a home-buyer class. Find programs in your area on the National Council of State Housing Agencies website, or at the Down Payment Resource, which offers a calculator that can show you what you may be eligible for.
You may be able to get a mortgage with no down payment or a limited down payment from a credit union-a nonprofit banking cooperative whose members can typically borrow at lower rates.
In order to qualify, you will probably have to meet limited income requirements-such as a maximum of 80% of the median area income. You’ll also need a decent credit score. But the policies can vary widely, so check. For instance, the San Francisco Federal Credit Union recently offered 100% financing for up to $2 million to borrowers with an average credit score of 747 and $219,000 income.
I have excellent lender resources for properties all across Hawaii. Contact me today to start your road to owning a home in paradise! Aloha!
Renee H. Kraft Luxury Top performing Hawaii State Broker born and raised on the island of Oahu named one of Hawaii State’s very best Realtors. She brings exceptional service to her clientele. Licensed professional Realtor in Hawaii Real Estate since 1992. She has the experience and tenacity to market effectively, negotiate, and focus with attention to detail every step of the way. Educated 7th – 12th grades at the La Pietra Hawaii School for Girls and the University of Hawaii Manoa campus with a B.A. in Psychology. She strives to continually keep up on the Hawaii economic forecasts and daily market activity. Technology driven Renee understands the importance of keeping her clientele in the loop on current market availablility and knowing the market inventory is 100% key to get her clients what they want. Extraordinary exceptional homes, estates, condominiums, and vacant land are her specialty. Integrity and honesty are just a fraction of what Renee shares with her clients and a very strong work ethic. Putting the client’s needs first utilizing the range of experience and knowledge, combined with a a huge amount of Aloha gives her great satisfaction that she can help her clients make sound and profitable real estate investments. Member Rotary Club of Kona -Accredited Buyers Representative (ABR) -Sellers Representation Specialist (SRS) -Graduate Realtors Instutute (GRI) -Resort and Second Home Property Specialist RSPS).