3 Types of Mortgages With Low or No Money Down

Often when I talk to potential clients about the home buying process here in Maine, they have a preconceived notion that they need a down payment of 20% to qualify for a mortgage. This is simply just not true. To disprove this misconception, I decided to write up this quick explanation of the 3 most common types of mortgages that require very little or even no money down. If you're thinking of making a purchase in the near future, We would be happy to point you in the right direction for your financing needs. Please do not hesitate to contact us with any questions or concerns. 

Maine Homes for Sale

3 Types of Mortgages With Low or No Money Down

  • Federal Housing Administration (FHA) Loans

  • Department of Agriculture (Rural Development) Loans

  • VA Home Loans

Federal Housing Administration (FHA) Loans

The Federal Housing Administration offers a low down payment option to the general public. With a minimum down payment of 3.5 percent, a homebuyer can receive a guaranteed loan.

In today’s market, about 15 percent of all mortgages are FHA insured loans. This is up by more than 12 percent from the market share that the FHA had during the housing boom. They have increased their market share due to the fact that many other low down payment options were eliminated when the housing bubble burst.

Department of Agriculture (Rural Development) Loans

The Department of Agriculture has what is known as the Rural Development mortgage guarantee program. This program is so popular that it has consistently run out of money before the end of the fiscal year. This means that the timing of the homebuyer’s application is vital. Many mortgage consultants list this program as their favorite to recommend to many of their clients.

Despite the name of the program, the eligibility of this program is not confined to rural farmland. Those who may be interested should contact a mortgage broker or specialist to find out more about these types of loans.

VA Home Loans

There are loans that are guaranteed by Veteran Affairs — formerly known as the Veterans Administration. These types of loans are designed for veterans who qualify for VA home loans. These loans do not require any money down to obtain loan approval. These loans actually originate through private lenders, but they are guaranteed by the VA. Another great benefit with this type of loan is the fact that there are no mortgage insurance requirements. The borrower is required to pay what is known as a funding fee, but the fee can be rolled into the loan amount.

The funding fee for VA loans varies, depending on certain criteria such as whether the veteran in question served in the regular military or the reserves, and whether it is the veteran’s first VA loan or a subsequent one. The funding fee can be anywhere from 2.15 percent to 3.3 percent.

Bottom Line

There are plenty of options when it comes to mortgages with little or no money down. Working with the right mortgage expert will help alleviate a significant amount of the stress that is associated with finding the ideal lending situation. Again, feel free to contact me anytime to discuss your real estate goals, and I will get you on the right path.

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