| For many people, especially first-time
buyers, "the lack of a down payment is the
typical hurdle" to homeownership, said Steve
O’Connor, senior director of residential
finance at the Mortgage Bankers Association of
America. Today, however, there are numerous special
programs with low down payments, some specifically
designed for first-time homebuyers.
According to the Mortgage Bankers Association,
there has been an expansion in the past few years
of mortgages with low 3 percent down payments.
You should check with your bank or financial institution
about the requirements for any low down payment
loans or first-time buyer programs they may offer.
Specific programs
You can contact these agencies directly for more
information, or ask your mortgage banker or broker:
• Fannie Mae: This major publicly-chartered
corporation that buys mortgages from lenders and
sells them to investors offers a mortgage known
as Fannie Mae97, which features a loan-to-value
(LTV) percentage of 97 percent. It requires a
3 percent down payment on either a 25- or 30-year
fixed mortgage. It is primarily a loan for people
with modest incomes who want to become homeowners.
Borrowers must take a pre-purchase homebuyer education
session to qualify for this loan.
• Federal Housing Administration: This
agency of the Department of Housingn and Urban
Development insures residential mortgage loans
made by private lenders. With FHA insurance, you
can buy a home with a down payment of from 3 percent
to 5 percent of the FHA appraised value or the
sale price, whichever is lower. FHA mortgages
have a maximum loan limit that varies depending
on the average cost of housing in a given region.
Check out the latest bankrate.com survey of FHA
mortgage interest rates.
• Veterans Administration: The VA guarantee
allows qualified veterans to buy a house that
costs up to $203,000 with no down payment. In
addition, the qualification guidelines for VA
loans are more flexible than those for either
FHA or conventional loans. To determine whether
you are eligible, check with your nearest VA regional
office.
• Rural Housing Service: This agency of
the Department of Agriculture provides financing
to farmers and other qualified borrowers buying
property in rural areas who are unable to obtain
loans elsewhere. It offers low-interest-rate loans
with no down payment to borrowers with low- and
moderate-incomes who live in rural areas or small
towns. Check with your local RHS office.
State and local government programs: Many states
or local housing agencies sponsor programs to
help first-time homebuyers who meet specified
income guidelines. These programs offer loan terms
with a low down payments and/or low interest rates.
Some state and local programs also may offer down
payment and closing cost assistance. Check with
your state or local housing authority.
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