Low Down Payment Mortgage Options

A down payment is a sign of good faith that you, as a homebuyer, are committed to and financial stable enough to purchase a home. With many conventional mortgages, raising the funds for a down payment can be one of the last hurdles that stand in the way of worthy borrowers before they can close on a home. In this week’s blog from Lucey Mortgage Corporation, let’s talk more about low down payment loans available to residents in Mount Pleasant, SC. While making the decision to purchase a home still is a large commitment – down payment or not – these programs can help mitigate the up-front cost you’ll face in the process.

Nonconventional Loans

Many nonconventional loans have built-in low or no down payment requirements. These government-backed loans were created in the first place to encourage lenders to open their doors to more borrowers – and that includes those with less cash in hand for a down payment. FHA loans have down payment requirements from 3.5-10%, while USDA and VA loans require 0% down. When it comes to a down payment, nonconventional loans can’t be beat in many cases, though they have certain stipulations and other pros and cons that, of course, you’ll also need to consider.

Conventional Loans

Piggyback loans are secondary mortgages that pay for the cost of a down payment. Typically, they range in value from 10-30% of the value of a home. While you’ll typically pay more for your down payment because of the interest on piggyback loans than you would if you put money down up front, the beauty here is that you can pay off these loans at the cessation of your primary mortgage. Essentially, you roll the cost of your down payment into the long-term repayment plan for your mortgage.

Fannie Mae is a government-sponsored entity (GSE) that provides two programs with just 3% down payment requirement, called the HomeReady Mortgage (for low and middle incomes) and Conventional 97 Loans. While sponsored by the government, Fannie Mae is not an official government agency; thus, these are considered conventional loans.

If you’re a teacher, police officer, firefighter, nurse, or are in a similar profession, you are likely eligible for at least one type of down payment assistance program through the state. When you come in for a consultation, we can talk further about your options. Likewise, if you’re a first-time homebuyer, there are certain statewide programs that function like piggyback loans, but typically with lower interest rates.

Sweat equity loans are less popular in recent years but are still an option for some homebuyers interested in building a home. Sweat equity programs require that the homebuyer helps build his or her home and, in return, has a lower down payment requirement.

Overcoming the Down Payment Burden

It’s important to note that, while they help you save on homeownership costs right now, almost all low down payment loans will cost you more over time than loans requiring a large down payment would. Any amount of money that you finance – for the most part – is subject to interest, and avoiding interest is preferable in most cases. However, if you are otherwise prepared to own a home and are interested in low down payment loans, contact Lucey Mortgage Corporation in Mount Pleasant, SC. We’re here to answer your questions and give you further detail on any of these options.