1. USDA Loans
If you’re shopping for a home in a rural area, you can get a home loan using the Department of Agriculture program’s USDA loans
. USDA loans help people with low and moderate incomes buy in rural areas. There might be no down payment required and loan payments are fixed. It’s best to have a credit score of 640 or higher, but you can still qualify for a USDA loan with a lower score, your lender will just need extra documentation about your payment history.
2. HUD’s Good Neighbor Next Door
The Good Neighbor Next Door
program, run by the Department of Housing and Urban Development, can help you save on properties in an area marked for revitalization. The program was formed to encourage people to renew properties in specific areas and is only open to certain professions including law enforcement officers, firefighters, emergency medical technicians and teachers. You will get up to 5% off the list price of the home if you commit to living there for at least 36 months.
3. VA Loan
The U.S. Department of Veterans Affairs (VA)
helps active-duty military, veterans and surviving spouses buy homes by guaranteeing part of the loan. This makes it possible for lenders to offer special features. These loans usually come with competitive interest rates and do not require a down payment. There is no minimum credit score or private mortgage insurance (PMI) required.
4. FHA Loan
The Federal Housing Administration insures mortgages in an FHA loan
. They offer lenders protection if you default on the mortgage. They come with competitive interest rates, smaller down payments and lower closing costs. With a credit score of 580 or higher, you could be eligible for a mortgage with a down payment as low as 3.5 percent of the purchase price. You might still qualify for a FHA mortgage with a lower credit score, but the down payment would be at least 10 percent.
5. Energy-Efficient Mortgage
Government supported EEM loans
are insured through the FHA or VA programs. They are designed to help you add improvements to your home to make it more energy-efficient or “green.” The main benefit is that you get to create an energy-efficient home without having to pay a larger down payment because the extra cost is rolled into your primary loan. Improvements that will help you qualify for the mortgage include installing double-panel windows, adding new insulation or including a modern heating-and-cooling system.
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The most common thing stopping first-time home buyers from actually buying is, you guessed it, money and coming up with enough for a down payment.
If you don’t have enough for a down payment right now, don’t give up yet.
Here are five grants and loans that can help you purchase a home without a huge down payment.