The Ultimate Guide to Have Mortgage Loans with a Low Down Payment

For many Americans, homeownership is a dream-come-true. However, saving for that mortgage down payment can feel very intimidating, making many quit on their American dream of homeownership. Here is the good news, you don’t even have to raise the 20% down payment for a mortgage because there are other easy and affordable alternatives provided by the best mortgage lenders in Utah. These alternatives are easy, affordable, and reliable for everybody, whether first-time homeowners or others.

Going for low down payment or no down payment types of mortgages is much faster and reliable, especially when your savings isn’t good enough to cover the 20% down payment. Low down payment mortgages of as low as 3.5% down payment are available for first-time homeowners based on their ability to pay standard closing costs. So not having enough savings to cover the 20% mortgage down payment should not hinder homeownership.

This post will look at the options available when accessing mortgage loans with low down payments. The following post also goes ahead to expound on the expected conditions that have to be met for someone to qualify for these types of mortgages.

Consider the Low Down Payment Options

For many, Going for mortgage loans with a low down payment option is all they need to get started in their homeownership dream. This segment will look into some of the available mortgage loans for you if you are not in a position to make the 20% mortgage loan down payment.

The FHA Loan

The Federal Housing Administration avails low down payment mortgages through given mortgage lenders. Through the FHE home loan, low to moderate-income earners can afford decent homes with minimal loan qualification requirements compared to other conventional home loans.  Even if this is a government-sponsored program, there are other private FHA lenders as long as you meet their lending requirements. 

Qualifying for an FHA loan allows you to borrow up to 96.5% of the total home value you are looking forward to acquiring.  However, please don’t mistake that the federal housing administration is the one that lends you the money to purchase the home, but it is the FHA-approved lenders, i.e., the local banks within Utah. So, the FHA only acts as the guarantor of the loan. 

You are also be required to pay for the mortgage insurance payments to the Federal Housing Administration. Through the FHA backup, the lender is guaranteed payment of defaulted loans by FHA if you default your mortgage repayments. Note, homebuyers who can pay off their mortgages quickly getting the privilege of accessing short-term mortgage benefits. These benefits include but are not limited to reduced FHA mortgage insurance premiums etc.

Requirements by the FHA for you to Qualify for an FHA Home Loan

• One must be able to make a down payment of 3.5% or more. 
• Must have a debt/income ratio of less than 43%
• Have a Credit score of not less than 580
• One should show a willingness to pay monthly mortgage insurance. 

You Need to Raise your Credit Score

Raising your credit score to 500 and above is necessary for you to qualify for an FHA home loan. You may not get the loan right now, but the benefits of applying for a loan with a good credit score. You can get more lender choices and reduced loan interest rates.

The Following Tips will Help you Raise your Credit Score Exponentially.  

• Paying down your outstanding debts 
• Follow up and remove any errors in your credit report.
• Be patient as your accounts become older and more appealing to lenders.
• Get a small personal loan, then  pay it back soonest
• You may apply for a credit card that is secured and requires a deposit that required full payment.

The Conventional 97 Mortgage

If you are looking forward to buying your first home or even a mortgage for building a house, then the conventional 97 mortgage is a superb option. Mae and Freddie Mac provide the conventional 97 to assist first-time homeowners. However, even the previous homebuyers can access this mortgage loan as long as they have not owned any property within the past three years. With Conventional 97, you must pay only a 3% down payment, and the lender provides the 97% balance.

The conventional 97 is much more forgiving. Applicants are not required to complete a mandatory pre-purchase homeownership education as it is a requirement for other low down payment mortgage lenders. Also, it does not set an income limit for you to qualify as compared to other low down payment mortgage lenders.

Requirements for Applying for the Conventional 97 Mortgage Loan

• Have a debt-to-income ratio of 43%
• One of the borrowers should be at least a first-time homebuyer.
• Should have a 680 typical FICO score following the borrower’s financial profile.

Some Advantages of Low Down Payment Mortgage Lenders Are

• It makes home buying easy and affordable, even for low to moderate-income earners.
• You don’t have to go through the homeownership counseling processes.
• Conventional 97 mortgage loan enables you to buy a home sooner. You don’t go through the stress of saving the conventional 20% mortgage down payment.
• Allow borrowers to keep more cash in their pockets for other expenses as you don’t have to pay the 20% mortgage down payments like in the other conventional loans.

Summary

There you have it! Your dream to own a home or even build one is still very valid. The low down payment mortgage lenders have got your back. Additionally, you may also consider other alternatives like no down payment mortgages like the USDA home mortgage loan, the VA home mortgage loan, reverse home mortgage, etc. The US Department of Agriculture backs up the USDA home loan, and the Department of Veteran Affairs backs the VA loan. You may consider any of them if you still don’t qualify for the low down payment home mortgage loans.