Wait! You mean you don’t have 20% to put down toward a home purchase? You don’t have perfect credit? What will you do?! Your initial thought is to lease an apartment or a home. This is what most resort to when they’ve been told it requires a large down payment and good credit to purchase a home. Well, fear no more, it’s not as difficult as you may think.
The average credit score required for a one year lease is 660. A lease also typically requires that you put down a deposit and your first months rent. Did you know that FHA, USDA, and VA financing guidelines allow for credit to be as low as 580? Did you also know, that Conventional financing guidelines allow for credit to be as low as 620? A credit score of 660 would qualify you for most programs based on their minimum credit score requirements. In addition to credit woes, is the worry of not having enough money to close, or enough to put down on a home. There are a few common financing programs which cater to buyers who fit this criteria. The Federal Housing Administration also known as FHA, the United States Department of Agriculture also known as USDA, and Veterans Affairs also known as VA. VA loans are catered to our Veterans for their home financing needs. FHA, USDA, and VA are great programs for those who don’t necessarily have a large amount of money to come to the table. FHA only requires a minimum down payment of 3.5% of the purchase price. USDA and VA are programs that offer no down payment. This means you can finance 100% of the loan with no down payment. FHA and USDA financing programs also have low mortgage insurance rates, also known as, PMI. PMI is a portion of your payment which is paid over the life of your loan.
Low down payment or no down payment are not all that these loan programs have to offer. The FHA and USDA programs facilitate their buyers by allowing them to ask the seller to pay up to 6% of the purchase price toward their closing costs. The VA financing program admits buyers to ask the sellers to pay up to 4% of the purchase price toward closing costs, and 2% of the purchase price toward prepaid closing costs. So what does this all mean? Let’s look at an example of a home purchase for $100,000.00. Financing FHA would only require you to bring $3,500.00 for down payment. It would also allow you to ask the sellers to pay up to $6,000.00 toward your closing costs. Financing VA or USDA would require no down payment and essentially the same amount from the sellers toward closing. If the seller agrees to pay a portion of your closing, this can eliminate a financial burden for you as a buyer who may be limited on funds.
Renting may seem like a quick way to get yourself into a home without hassle and a large chunk of cash. However, you may want to reconsider and think of the benefits of homeownership, investing in yourself, and your future by establishing an asset of the American Dream…a home of your very own.
For any financing questions please feel free to contact me, loan officer for Movement Mortgage, Erin Sanden-Miller (717) 623-1321.