Are you dreaming of owning your own home but worried about the daunting prospect of saving up for a down payment? Whether you’re a first-time homebuyer or have limited funds for a down payment, there are various options available to make your homeownership dreams come true. In a recent podcast transcript, Dave Barlow and Rich Cercone, experts from Sell for 1 Percent along with Jaime, discussed the multitude of down payment options available for homebuyers. Let’s dive into the conversation to uncover the secrets of home financing.
FHA Loans: Low Down Payment with Flexibility
FHA loans, backed by the Federal Housing Administration, offer an attractive option for buyers with limited funds for a down payment. These loans require a minimum down payment of 3.5% of the home’s purchase price. For example, on a $300,000 home, this translates to just over $10,000.
One of the significant advantages of FHA loans is their flexibility when it comes to credit history. If you’ve had some past credit issues, like late payments or even a bankruptcy a few years back, FHA loans may still be an option for you.
However, there is a trade-off. FHA loans come with upfront mortgage insurance, typically 1.75% of the loan amount, which can be financed into the loan. Additionally, FHA loans have monthly mortgage insurance, which is a permanent expense throughout the life of the loan. So, while FHA loans offer a low down payment option and are more lenient on credit history, the cost of mortgage insurance should be considered.
Zero Down Payment Programs
Dave Barlow kicks off the conversation by highlighting that there are options for buyers all the way down to a zero-down payment program. Yes, you read that correctly – you can potentially purchase a home with no money down!
The zero-down payment program mentioned in the conversation is facilitated by the Ohio Housing Finance Agency. This program combines a first mortgage and a second mortgage. The second mortgage is typically forgivable after ten years, allowing you to finance your closing costs and even come to the closing with less than $100 out of pocket. However, it’s essential to note that this program has income limits, typically capped at $112,000 in central Ohio.
While zero-down payment programs sound enticing, it’s crucial to consider that they often come with higher interest rates and costs compared to other loan options. So, if you have the means to put down some money, you might be better off exploring alternative loan types.
Conventional Loans: A Versatile Choice
Conventional loans, sponsored by Fannie Mae and Freddie Mac, are another popular choice for homebuyers. Traditionally, conventional loans required a 5% down payment. However, there are now options to put down as little as 3%, provided you meet certain income limits.
These low-down-payment conventional programs, such as Fannie Mae’s HomeReady and Freddie Mac’s Home Possible, often come with better rates and more favorable private mortgage insurance (PMI) structures compared to the 5% down option. While they have income limits (typically around $80,000 in central Ohio), they can be an excellent choice for buyers looking to purchase a home in the $300,000 to $350,000 range or less.
Exploring Down Payments on Multi-Unit Properties
In a recent and exciting development, conventional loans have broadened their range of options to cater to the growing demand for multi-unit property investments. Previously, acquiring a 2 to 4 unit property often required a hefty down payment of 15% or more, which could be a significant barrier for many aspiring real estate investors. However, the landscape has evolved, and now, if you plan to make one of the units your primary residence, you have the opportunity to purchase such a property with just a 5% down payment.
This 5% down payment option for multi-unit properties under conventional financing is an attractive proposition for those seeking to build wealth through real estate while enjoying the benefits of owner-occupancy. It provides a unique blend of homeownership and investment potential that can help you take significant steps toward securing your financial future. So, if you’ve ever dreamed of becoming a real estate investor and living in one of your investment properties, this new conventional loan offering may be just the opportunity you’ve been waiting for.
The USDA Option
Apart from the podcast’s financing options, the USDA loan program stands out as an exceptional choice. Tailored for those seeking homes in rural or qualifying suburban areas, USDA loans offer a unique advantage by providing 100% financing, effectively eliminating the need for a down payment. This makes them highly attractive to prospective buyers in these regions, as it removes a significant barrier to homeownership, allowing a more diverse range of individuals and families to enter the housing market.
USDA loans not only alleviate the financial burden of an initial lump sum but also introduce buyers to the appeal of tranquil rural living or more affordable suburban environments compared to urban areas. While the podcast didn’t cover this option, it’s crucial to recognize the USDA loan program as an invaluable resource for eligible buyers, offering a path to homeownership that combines financial accessibility with the charm of rural and suburban life.
The Bottom Line
As you can see, there’s a wide array of down payment options available to prospective homebuyers. Your choice should align with your financial situation, credit history, and homeownership goals. While zero-down payment programs may sound tempting, it’s crucial to weigh the potential downsides, such as higher interest rates and costs.
Before making a decision, it’s advisable to consult with a qualified mortgage professional who can help you navigate the various loan programs, determine your eligibility, and guide you toward the best option for your specific circumstances. Dave Barlow, Rich Cercone, and Jaime, the experts from Sell for 1 Percent, offer their extensive experience to assist you on your path to homeownership in Columbus, Ohio.
Remember, your journey from desiring a home to closing the deal involves numerous scenarios and options. Your dream of homeownership may be closer than you think, so don’t hesitate to explore the possibilities and embark on this exciting journey to make your dream home a reality. Check out our video on downpayments below for more!
For more detailed information and personalized advice, reach out us here at Sell for 1 Percent or connect with your trusted local mortgage professional. Your future home awaits!
