Video Transcript
There are so many ways to buy your first home without making a big down payment – or without making a down payment at all – and we’re going to talk about 16 of them. I’m Dan with Homebuyer.com. Let’s get into it.
[Play the doorbell and make the dogs bark] You are a first-time home buyer – and there are so many ways – you can buy a home – with little or no money down – or with help from the government – this is what we call a run-down video – a survey of your options as a first-time buyer – with links in the description to our website – where you can read more – or get today’s live mortgage rates – if that’s more of what you’re after. Now – none of the options – we highlight in this video – will require you to make a down payment of more than 5 percent – and many of the loans we’ll talk about – require no down payment at all – which we should point out – come with at least the same low interest rates as every other mortgage – and sometimes lower – because the programs we talk here – for first-time buyer – will not penalize you – or push your rates up – just because you’re putting less than 20 percent down – that’s practice a relic of the 1990s – an ancient practice – for buyers in a different era. So, if there’s anything you leave this video with as a takeaway – let it be this: making a small down payment – or no down payment – on your first home – that is not financial risk to you.
It’s the opposite, actually. When you put less of your own money into a home – it’s the bank that makes up the difference – which means – it’s the bank that takes the risk. So, when you can put less of your own money – and get the same low rate to buy a home – you do that.
Before these programs, the typical first-time buyer spent 7 years – saving to buy a home – just saving – and waiting – until they had enough down payment. While mortgage rates went up – and prices of homes went up – well you don’t have to do that. If you have even a small amount saved up, you can stop renting sooner and start owning.
On your schedule. Maybe even today. So – here are all the ways that you can buy a home now – and start your American Dream.
And we’re going to do this by category. First – we’ll talk about your basic mortgages – government-backed mortgages – low- and no downpayment loans you can get from any mortgage company. Then, we’ll go into cash grants and special programs – that you can consider.
And, last – we’ll talk about proposed programs – such as tax credits going through Congress – that can help you buy a home. Ok, let’s start with your low- and no- down payment mortgages – of which there are five main programs. And remember – this is a run-down video.
We’ll offer a few quick details on each and remind you that there are links to each program in the description where you can read more – or – if it’s more your style – just ask your questions in the comments. Ok, option 1. HomeReady.
HomeReady is not a mortgage type – it’s a brand name – for a home affordability program – one of government group Fannie Mae’s several low-downpayment, 30-year fixed-rate mortgage loans. The HomeReady program lets first-time buyers put 3 percent down, with reduced mortgage insurance costs, and get subsidized mortgage rates through another program known as the First-Time Home Buyer Mortgage Rate Discount. We have details on that program too – in the description.
HomeReady is available to buyers with household income at or below the median household income for an area – and the program accepts almost all credit scores and types – so – if you’re buying a home, always ask whether your mortgage can be HomeReady-eligible. It’s one of the best deals going. Option 2 – Home Possible.
Home Possible is another branded mortgage – a 30-year fixed-rate, low-down payment mortgage – but this one is from Fannie Mae cousin Freddie Mac – which is why – Home Possible is almost a carbon copy of that last program we discussed – just before. The biggest difference between HomeReady and Home Possible is that Home Possible requires a higher minimum credit score – by 40 points. So why use Home Possible if you need a higher credit score?
Well, you probably wouldn’t – except – when you’re buying a multi-unit home – a home with 2-4 units – because Home Possible is designed as a mortgage for low- and middle income households that are also multi-generational. Parents, grandparents, children – cousins – living together – in one home – under one roof – with multiple people contributing to monthly payments. And for scenarios like this, Freddie Mac’s program is looser for getting approved and flexible on sources for down payment – in ways that HomeReady is not.
So, if you’re a multi-generational household – buying a multi-unit home – Home Possible could be your low-downpayment loan. Option 3 – The Conventional 97. Conventional 97 is named, literally.
It’s a conventional loan – which means it’s backed by Fannie Mae or Freddie Mac – and it’s for 97 percent of the purchase price – Conventional 97. Conventional 97 was remade in the last few years. It used to be for ultra-high credit scores only.
Now, it’s for almost everyone. It’s the catch-all, low-down payment loan for single-unit homes – which includes your typical house, your condos, your townhomes – your rowhomes. Conventional 97 is three percent down and there are no maximum income levels for buyers who want to use it.
Rates are often good, too. And, those are 3 low down payment loans offered through Fannie Mae and Freddie Mac. You have other government-backed options, too, of course.
Like Option 4 – the FHA loan. FHA loans are actually FHA-endorsed loans – because the FHA doesn’t make mortgage loans – it insures them – for lenders – and the FHA’s insurance policy says it will approve payouts for loans with as a little as 3.5 percent down on a home – for buyers with 580 credit scores or higher – and all income types – in all 50 states. But that’s just what’s said out loud.
The FHA makes exceptions – like on credit scores – for buyers with credit scores of down to 500 – or buyers with no credit score at all. As a buyer, you will find FHA mortgage rates to be higher than for other loan types in most cases – and – FHA mortgage insurance rates to also be higher versus other loan types – which is why the FHA mortgage is usually best used as a catch-all, low-downpayment loan for first-time buyers to consider. It’s not a last resort loan – not at all – but there usually are less expensive home loans choices a first-time buyer can make.
Like this next program. Option 5 – the USDA loan. USDA loans are loans backed by the U.S.
Department of Agriculture. They are sometimes called Rural Loans – but rural in this sense is the Census Bureau’s definition of “Rural” which is any area that is not considered Urban. In these areas – defined by the density – of population – the USDA lets home buyers purchase homes with 100 percent loans – no money down – and with reduced-rate interest rates and insurance.
The only requirements beyond where you’re buying is that your credit score is decent – doesn’t have to be great – just has to be decent – and that you’re buying a modest home and you’re of modest means. USDA loans are usually – usually – the most affordable of the government’s home affordability mortgage lines – so if you’re buying anywhere that’s not “a city” – and that can be suburbs – farm towns – the boonies – give a look at USDA loans. We’ve got a lookup of every U.S.
home and its eligibility for a USDA mortgage – it’s on our website at homebuyer.com – before you buy a house – any house – check it against the map – it’s the best terms going – the link for that is in the description. Option 6: The VA Loan. The “VA” in VA Loan stands for Veterans Affairs, as in the U.S.
Department of -. VA loans are 100% mortgages – no money down loans – available exclusively to veterans of the armed services, active duty military, surviving spouses, members of the Reserves and National Guard – plus a few other specialty roles. VA Loans can be used for any home – in any state or U.S.
territory – for any eligible buyer – at comparatively low interest rates. If you have VA benefits available to you, look at doing a VA mortgage before your other options – because – usually – it’s the best combination of rates, fees, and ongoing cost – with no downpayment required to buy your first home whatsoever. Terrific program.
Let’s hear it for the GI Bill that made it possible. And that – is the 6 off-the-shelf low and no downpayment, government-backed mortgage loans for first-time buyers. Next, we move into special mortgage programs that help to make homes more affordable – and this section covers cash grants, incentive programs, and forgivable mortgages so you can stop saving up for 20 percent down and get into owning your first home faster.
Option 7: The National Homebuyers Fund. This is the first of several grant programs available to first-time buyers. Through a non-profit, public benefit corporation, first-time buyers can get up to 5 percent of a home’s purchase price paid out as cash with the string attached that – if you move, sell, or refinance within the next five years – if you cease to make this home your main residence – the grant must be paid back – completely – all of it – back to the fund.
Also, renters cannot apply to the NHF on their own – they can only do it through their lender – so we put a link in the description with a phone number where you can get a list of participating mortgage companies in your area. Option 8: Forgivable Mortgages. Forgivable mortgages are exactly what they sound like – mortgages that can be forgiven – cleared out – marked as paid – just for staying on plan.
They’re second mortgages – subordinate liens – which means they’re for smaller amounts and most often replace the typical down payment a home buyer would make – So, for 3 percent – or 5 percent – of the purchase price – and when combined with a first mortgage – the main mortgage – a forgivable loan brings a first-time buyer up to 100 percent of their purchase price with none of their own money to the table – no cash, no down payment, no nothing. Also – and noteworthy – most forgivable loans don’t require buyers to make payments – there’s nothing due. So long as pay on your main mortgage – and live in your home for some number of years – usually five – the mortgage just exists – and then it doesn’t.
It’s forgiven. Forgivable mortgages must be requested at the time you make your main mortgage application – so ask about it when your mortgage is pre-approved. Option 9: Doctor Loans.
Doctor Loans are not an actual loan type – Doctor Loan is just the name that lenders use for a no-down payment mortgage available to doctors only – MDs, DDSs, Osteopaths – which caters to a higher-income crowd who are also good targets for related financial products – like credit cards, and auto loans, and investments. Which is why Doctor Loans are almost exclusively offered through retail banks – big banks with storefronts – who want your mortgage – and – your other financial business, too. So, if you have a medical degree – or are studying for one currently – Doctor Loans can be a good way to buy your first home with little or no money down – and a ton of cross-selling on retail bank product.
Option 10: Good Neighbor Next Door. Good Neighbor Next Door is another “you have to work a certain job to use this program” program and – here – those jobs are best categorized as neighborhood heroes – teachers, educators, firefighters, law enforcement – first responders. Through Good Neighbor Next Door, people who work in the communities they’re buying in – can get homes for half-off their listing price – actually half – and with a downpayment of as little as 100 dollars – actually 100 – with a caveat – that only certain homes are eligible for purchase – and those homes – must be listed for sale at HUD.gov – the government website – for homes that were repossessed – taken back – as part of a foreclosure.
And buyers should know that all HUD homes are sold as-is – with no repairs made – and some are in a less-than-liveable condition – but! – they’re also half-off. HUD.gov is the site.
Option 11: Local Downpayment Assistance Programs – DPAs. Downpayment assistance programs programs that give down payment monies to first-time buyers of homes and here – we’re talking about state and local programs – which can be tough for buyers to find – because programs of the state and local leve tend to be run by charitable groups – neighborhood communities, not-for-profit organizations – or small housing groups within a municipal government office – none of which invest a lot in their websites. The Department of Housing and Urban Development keeps a running list of local programs as best it can – that link is in the description – and on those pages – broken down by state and county – you’ll find access to interest rate reductions, closing cost credits – local tax breaks.
Most of the programs come with no strings attached – although – some will require you use a state-sanctioned lender. Option 12: National Downpayment Assistance. We separate National Downpayment Assistance – as number 12 on our list – from the state and local – because national programs are simpler to find – simpler to get – and just work.
The most common form of assistance are Cash Grants – often through platforms like the Federal Home Loan Banking system – paid to buyers directly for making a larger down payment, reducing loan closing costs, or paying anything else linked to buying your first home. The government only allocates so much money to its DPA programs so not every buyer will get approved. Alright, we’re in the home stretch, Let’s close with Section 3 – programs for first-time buyers in Congress and not yet passed into law.
And we start with Option 13: The $15,000 First-Time Home Buyer tax credit. The $15,000 First-Time Home Buyer Tax Credit – which is sometimes called the Biden Home Buyer Tax Credit – is a bill – that gives first-time home buyers up to $15,000 in a federal tax credit – right from your tax bill – for buying your first home. The tax credit was introduced in the last Congressional session and – so far – has not been reintroduced for the current one.
But – because housing – and home affordability – are central tenets for the White House – this popular bill may be reintroduced prior to the election. The last bill was written to be retroactive for two years. There’s no word if a current version would do the same.
We update you here as news comes up. Subscribers find out first. Next is Option 14: The DASH Act.
The DASH Act is a sweeping bill for housing – with 20-plus parts to it – the author calls it “generational” – but the part you’ll want to hear – is that – like the Biden Tax Credit – the DASH Act also includes a $15,000 tax credit just for first-time buyers. Qualification criteria includes moving into the house as your main residence – being at least 18 years of age – and buying the home in an arms-length transaction. The DASH Act has support from members of both parties in Congress – in both the House and the Senate – and may take a vote late in the year..
Option 15: The $25,000 Downpayment Toward Equity Act. The Downpayment Toward Equity Act is a cash grant program for first-time buyers who are also first-generation buyers – which means you are a first-time buyer and the first person in your family to own a home – with two exceptions. One – your parents or legal guardians lost their home to foreclosure – and two – you lived in foster care at any point in your life.
The Downpayment Toward Equity Act gives up to $25,000 to eligible buyers which can be used for anything purchase-related – down payment, closing costs, homeowners insurance – anything. And, lastly Option 16: The HELPER Act. The HELPER Act is a first-time home buyer program that exempts teachers, firefighters, law enforcement officers – other first responders – from the FHA loan’s down payment and mortgage insurance requirements – which means home buyers eligible to use the HELPER Act mortgage to buy a home can use an FHA mortgage to buy their first home and make no downpayment whatsoever – and have no monthly mortgage insurance payment to make – for the entire life of their loan.
The HELPER Act is moving through the House and the Senate quickly with more than 100 co-sponsors and lots of momentum toward passage into law. We have more on the HELPER Act in the description. [OUTRO] So that’s the 16 programs for today’s first-time home buyers.
Visit our website to get your mortgage approved in advance at today’s live mortgage rates. I’m Dan with Homebuyer.com – the mortgage company made for first-time buyers. Happy homebuying.
