There are several options out there to help you buy a home, even if you don't have thousands for a down payment. The following loan programs differ by the location they are available in and the amount
1. USDA loan: Typically only available in more rural areas, this loan allows 100% financing. A few key points:
- Loan value must not exceed appraised tax value
- Only low to moderate income buyers are eligible
- Must meet credit requirements
- Fixed 30 year interest rates apply
- "Qualifying ratios are 29% for housing costs and 41% for total debt." -USDA.gov This means your housing expenses cannot be more than 29% of your income, and total debt (think student loans) may not exceed 41% of your income.
2. FHA loan: This is a mortgage "insured by the Federal Housing Administration" -Bankrate.com That means they protect the bank if you cannot follow through with the loan.
- 3.5% down payment is required
- Minimum credit scores apply
- The FHA allows sellers to pay for the buyer's closing costs, this means:
- Some lenders will pay for your closing costs, but it may come as an increase to your interest rate
- Some builders offer to pay your closing costs as an incentive to buy with them
- "Because the FHA is not a lender, but rather an insurance fund, borrowers need to get their loan through an FHA-approved lender (as opposed to directly from the FHA)"-Bankrate.com
3. VA loan: Available for Veterans and their families
- No down payment
- No mortgage insurance
- For primary residences only
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