Mortgage Options When You Have Less Than 20% Downpayment
The housing market is in recovery. Home prices are rising, "pocket listings" are back, and buyers find themselves with diminishing negotiation leverage over today's home sellers.
As we approach 2013's mid-point and head toward 2014, finding great deals in housing is going to get tough.
73% Of Buyers Put Less Than 20% Down
According to data from the National Association of REALTORS®, 73% of U.S. home buyers made a downpayment of 20 percent of less in 2012.
This high percentage of "low downpayment" buyers is the result of several factors including a rush of first-time home buyers, who traditionally don't have the savings to make a twenty-percent downpayment; and, the housing downturn of last decade, which left many "move-up" buyers without sufficient home equity to make a subsequent large downpayment.
Thankfully, as the economy has expanded, so have options for low-downpayment mortgages.
There are more than a half-dozen such programs, some of which I outlined in an article written for Trulia entitled "4 Low Down Payment Loan Options Every Agent Should Know".
The post is broken down by desired downpayment, showing the available home loan options at each level.
Low- and No-Downpayment Mortgage Options
The Trulia article highlights several well-known low- and no-downpayment mortgage options including the FHA mortgage as insured by the Federal Housing Administration; the VA mortgage as guaranteed by the Department of Veterans Affairs; and the conventional mortgage option with accompanying private mortgage insurance (PMI).
The piece also reviews several lesser-known, low-downpayment programs available to today's home buyers.
One such program -- the Conventional 97 program -- is a Fannie Mae-backed mortgage which allows for 3% downpayments. This is even less than the FHA's required 3.5 percent downpayment requirement.
Furthermore, as compared to the FHA mortgage, the Conventional 97 calls for a smaller mortgage insurance payment and requires no upfront mortgage insurance premium to be paid at closing.
Another highlighted program is the U.S. Department of Agriculture's (USDA) Rural Housing program. Available in many U.S. suburbs and exurbs, the Rural Housing mortgage allows for 100% financing with minimal annual mortgage insurance.
100% financing is not required via the USDA, but many home buyers opt for that route.
Get Pre-Approved For A Low Downpayment Mortgage
For today's home buyers, a mortgage pre-approval may assist the home search. You'll know exactly how much home you can afford, and you'll know the mortgage options which remain available to you through the home-buying process.
You can also use this flowchart to determine which home loan is best for you.