“Within the 50 states, how many can allow buyers secure an affordable down payment?”
If you don’t know the answers, you’re not alone. There are 19 million young Americans who are qualified for a mortgage who don’t have one. Here are four ways to become a homeowner without needing down payment:
Borrowers with credit scores of 580 and above can put down as little as 3% on a Federal Housing Administration-insured loan. This means that it is typically easier to qualify for an FHA loan in contrast to a loan with a private lender. However, FHA borrowers who put down less than 20% are hooked to private mortgage insurance, until they refinance or fully pay off the mortgage. With a private loan, PMI is automatically canceled after equity reaches 75% of the purchase price.
Reduced Down Payment (Conventional Loans)
Since home prices have been climbing since 2012, lenders discovered that high down payment requirements were diminishing the attraction for new mortgage customers. They then began offering low down payment loans to borrowers with high credit and earning potentials. Credit score and payment size requirements vary between each individual. For example, special mortgages are offered to novice doctors – who typically have substantial student debt and earn a fairly modest salaries during their residencies. These loans often don’t require private mortgage insurance.
Down Payment Assistance Programs
Down payment assistance programs, which provide grants or loans, are beginning to grow in popularity. There are now more than 2,000 down payment assistance programs across the country – many of which help home buyers regardless of their income. While there are some national programs, most are offered individually for each state. Urban Institute researchers found that in 2017, a quarter of the New York metropolitan area were eligible for at least one down payment assistance program. Qualified borrowers have the opportunity to receive an average of $13,500.
Numerous tech companies are looking to tackle issues regarding down payment. Unison Home Ownership Investors will match your down payment in exchange for a share of the profit when you sell. Several startups are offering to essentially buy your home for you with new designed rent-to-own programs. While there is certainly room for improvement in home finance, be cautious of the fine print before signing on with an untested model.
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