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Looking For Low Down Payment Options | 3% Down | FHA | Home Ready | Home Possible

Looking For a Lower Down Payment? Here Are Your Options.

A low down payment doesn’t have to limit you. There are a variety of options designed to help you find the right 3% down financing plan for your home purchase. My favorites are the Home Ready and Home Possible options — aimed squarely at the Millennial and Gen-Z Home Buyers Hustle. If your Seller gives a credit of 3% of the loan amount to help with closing costs and prepaid elements, you can get into a home with as little as that 3% down. Check out these options and let’s talk about the right choice for your home purchase.

Let’s Get Started

When you first think about buying a home, you may find your head filled with thoughts of interior design, landscaping, and entertaining. The reality of home finance, however, is that there are a number of up-front costs associated with the purchase itself, which can leave you short of cash to do the things you’ve planned. Managing those costs ensures that you have the funds you need to both buy your new home and enjoy it.

If you’re thinking about home ownership, one of your biggest concerns may be saving up for your down payment. Alongside closing costs, moving expenses, and other charges associated with a home purchase, the down payment is probably the most expensive part of buying your new home.

The traditional down payment associated with a conventional loan is upwards of 20%. In expensive markets, this could mean tens of thousands of dollars for even the most modest starter home or condo. In order to support the goal of home ownership, therefore, many lenders have created loan products designed to allow for lower down payment amounts; among the best deals are 3% down products.

 

A low down payment doesn’t have to limit you. There are a variety of options designed to help you find the right 3% down financing plan for your home purchase. My favorites are the Home Ready and Home Possible options — aimed squarely at the Millennial and Gen-Z Home Buyers Hustle. If your Seller gives a credit of 3% of the loan amount to help with closing costs and prepaid elements, you can get into a home with as little as that 3% down. Check out these options and let’s talk about the right choice for your home purchase.

Home Ready

This program is sponsored by Fannie Mae. The Home Ready loan requires as little as 3% down payment for fixed rate loans of either 10, 15, 20, or 30 years. Here are some of the highlights:

  • Minimum credit score of 620
  • No up-front MIP
  • Gift funds allowed from family
  • 1-4 Unit Properties eligible
  • Flexible source of income eligible
  • Not required to be first-time homebuyer
  • At least one borrower must take a home ownership course
  • Primary borrower must occupy as their primary residence
  • Available for purchase or refinance
  • Higher Ratio’s to 49.99 Debt to Income
  • Seller can pay 3% toward closing cost, and 6% at 90%

Home Possible

This program is sponsored by Freddie Mac. The Home Possible loan requires as little as 3% down payment for fixed rate loans of either 15, 20, or 30 years. Here are some of the highlights:

  • Minimum credit score of 620
  • No up-front MIP
  • Gift funds allowed from family
  • 1-4 Unit Properties eligible
  • Flexible source of income eligible
  • Not required to be first-time homebuyer
  • If all borrowers are first-time homebuyers, at least one borrower must take a home ownership course
  • At least one borrower must occupy as their primary residence
  • Available for purchase or refinance
  • Higher Ratio’s to 49.99 Debt to Income
  • Seller can pay 3% toward closing cost, and 6% at 90%

Home One

This program is sponsored by Freddie Mac. The Home Possible loan requires as little as 3% down payment for fixed rate loans of either 15, 20, or 30 years. Here are some of the highlights:

  • Minimum credit score of 620
  • No up-front MIP
  • Gift funds allowed from family
  • 1 unit properties only
  • No borrower income or geographic limits
  • At least one homeowner must be a first-time homebuyer
  • At least one borrower must take a home ownership course
  • Available for purchase or refinance
  • No restrictions on income Seller can pay 3% toward closing cost, and 6% at 90%

FHA

Insured by the US Federal Housing Administration, the FHA loan requires as little as 3.5% down payment for fixed rate loans of either 15 or 30 years. Here are some of the highlights:

  • Minimum credit score of 580 to qualify for 3.5% down
  • Minimum credit score of 500; maximum 90% Loan-to-Value (LTV) for credit scores under 580
  • Mortgage Insurance Premium (MIP) required: 1.75% up-front, .45-1.05 annually for the life of the loan ( avoiding fha allows you to not have to pay the 1.75% upfront fee)
  • Gift funds allowed from family
  • 1-4 Unit Properties eligible
  • Loan limits determined by county/state location of property
  • Not required to be first-time homebuyer
  • Available for purchase or refinance
  • Higher ratio’s are allowed to a 55 DT
  • Seller can pay 3% toward closing cost

Which 3% down loan product is right for you?

Interested in financing your home with a low-money down financing option? Choosing the right loan depends on a variety of factors.

 

  1. Your credit score: If you haven’t yet had time to build an extensive credit history or if you have made some financial mistakes in the past, an FHA loan might be a better option since it is available for borrowers with lower FICO scores. Keep in mind, however, that this will require a higher down payment in some cases, so it is in your interest to start early working on raising your credit score. That will give you the largest number of options.

 

Little to no credit does not mean you are out of luck! As long as you have credit scores and the automated underwriting engines give you an approval, you will be fine.

 

  1. Your income: Different products favor different types of income. If your income is stable and based on a regular, consistent salary, you might find a Fannie Mae product like the Home Ready loan is a better option for you. If your income is more variable and based on commissions, bonuses, or contract work, you might better qualify with a Freddie Mac Home Possible loan. Either way, be sure to keep good records so that you can adequately document your income.

 

And don’t forget: new salaried employment straight out of college does not need a two year employment history; college will count as time on the job.

 

  1. Your market: Since some loans, like the FHA mortgage, are market-dependent, you may find that the requirements and availability varies according to the type of home, the location of the home, and the price of the home. Home Ready and Home Possible can also be restrictive on income vs. FHA, while being lenient on adjustments for credit scores with potentially a much lower mortgage insurance rate. Be sure that you are working closely with both your lender and your real estate agent to ensure that you choose the right option for the right property and market.

 

  1. Down payment: All of these programs include the ability to have your down payment gifted from a family member. In addition, many, including Home Ready, feature lower cash reserve requirements. Generally, two months of mortgage payments or less in reserve will work for these loans.

 

  1. Refinancing: Refinancing can be done on all of these programs, so in some cases a Home Ready or Home Possible mortgage can help a borrower get out of FHA or refinance when in a higher LTV position without paying upfront mortgage insurance.

Depend on Kevin Retcher and First Meridian Mortgage Corporation

As a loan officer, an insurance agent, and a REALTORⓇ, I can offer you the experience, expertise, and market knowledge you need to make the right choice about both your property and your financing options. Let’s talk about your budget and take a look at the numbers to find the right low-money-down loan for you.

Low Down Payment pdf

First Meridian Mortgage NMLS ID# 180004, Kevin Retcher NMLS ID# 1116922

www,nmlsconsumeraccess.org, Kevin Retcher – Realtor – Jobin Realty, 5592 Backlick Rd, Springfield, VA 22151 703-642-8500, lic# 0225055584. KSA Insurance Agency NPN 8036794,VA LIC# 624093, Rates are subject to change

Housing Hustle for Millennial and Gen Z Home Buyers

Housing Hustle for Millennial and Gen Z Home Buyers

How to buy your first home right out of college or grad school .. and begin building wealth sooner than you ever thought possible.

It seems that you can’t read an article on real estate without at least a paragraph bemoaning the “refusal” of Millennial college grads to purchase their first homes. Forget the fact that they graduated during the build-up and aftermath of the Great Recession. Forget unprecedented levels of student loan debt. According to some, these young, highly educated consumers are wasteful with money, unwilling to give up their everyday luxuries to save for a home. One Australian mogul even blamed avocado toast. In reality, of course, Millennial’s are enthusiastically looking for home-buying opportunities.

 

For Gen Z, the desire to buy a home is a paramount goal, and many are just as motivated as their Millennial friends, siblings, and colleagues to begin looking ahead to home ownership. For each of these groups, student loans and lack of wage growth may make home buying seem like a distant goal. The good news? There are a variety of options to help Gen Z and Millennial’s with every step of financial planning for their home purchase.

Your Complete Guide to Millennial and Gen Z Homebuying

Think ahead and create a plan for home ownership that gets you moving into your own home sooner.

Step One: Plan Ahead

If your goal is to buy a home as soon as possible after graduating from college or grad school, you need to begin early building your professional resume. When you first arrive at college, begin early attending job fairs, even if you are not sure what field you want to major in. The experience you will gain in interview skills and networking will help you when it is time to land your first professional gig.

 

Secondly, landing internships should be a big part of your professional planning. Landing an internship early in your time as an undergrad can help make you more competitive and make you a front runner for other highly desirable internships. Even college freshmen can and do get internships, especially when reaching out and networking with friends, family, and other acquaintances.

Step Two: Establish Good Credit

At your first opportunity, get a credit card, even if it is a secured card with a $300 limit. The key is to establish credit as early as possible. Mortgage lenders like to see that you have some credit accounts with at least a 12 – 24 month history.

 

I am often asked if someone can buy a house with no previous credit history and the answer is Yes. However, approval is dependent on the type of financing — FHA or Conventional Fannie or Freddie. These rely on the automated underwriting engine for approval in most cases.

 

The minimum standards get tougher if a manual underwrite is required. It is better to have a few established credit accounts with you as a primary account holder and not as an authorized user. The key, of course, is to ensure that you use the card sparingly and pay it off completely each month. Late payments or carrying the maximum balance will set back your financial goals and stay on your credit report for years. If you currently have blemishes on your credit report, go ahead and pay them now and begin rebuilding your score.

Step Three: Establish Work History and Income

Once you graduate, the key to moving toward homeownership is a salaried job and a work history of two years in your field. The game-changing news for young home buyers? That time you spent in the classroom counts toward your two years of work history! In fact, all of the preparation you did for your job — internships, field work, and classroom experience — counts toward the time requirement.

 

Because commissions and bonuses don’t count as income within your first two years of employment for mortgage underwriting, a salaried job is critical to meeting your lender’s income requirements. However, if your company will guarantee a minimum commission and bonus as part of your employment verification, you may be able to include these as part of your income.

 

As soon as you confirm your new job and salary, contact your lender to start the pre-approval process. Get educated on the cost of a home in your chosen market and the costs associated with your purchase.

Step Four: Save for the Down Payment and Closing Costs

Many College graduates ask how much down payment is required to be able to buy a home. The minimum is typically 3-5% or more depending on the type of financing. Most 3% and 5% down programs do allow a gift from a family member, or money that is remaining from a 529 college savings plan to be used as a gift. In addition, some loan products and programs offer down payment assistance and even grants to help offset costs.

 

Another strategy is to move back home and save money for 6-7 months to buy your home. Once you have saved $15,000 to $20,000 then you can contact a lender to get pre approved to buy a home. Share your goals and plans with your parents; they will usually be happy to help with this process. They may even choose to provide some gift funds to help you bulk up your savings. Be sure to use this time to save as much as possible; don’t allow yourself to spend more just because your living costs are reduced.

 

The final step in the home buying process is closing, where you will need to provide several thousand dollars in taxes, fees, and other expenses. These are called closing costs, and depending on the market they can be very expensive. However, most closing costs can be paid for by the seller, the lender, or the real estate agent or broker. In addition, different mortgage programs and first-time homebuyer programs may provide credits and adjustments to the amount of the closing costs.

Step Five: Put it all together

When you’re ready, talk to your lender about real estate agent or broker recommendations. Work with a trusted professional in your chosen market to ensure you have top-notch advice throughout the process. In addition, your agent will help during the negotiation process for the purchase and after the home inspection. The best part? The seller pays for all real estate commissions, so this professional representation comes at no cost to you.

 

In addition, your lender is a valuable resource for recommendations on title and settlement companies, as well as a variety of other professionals in your market. Don’t hesitate to reach out if you have questions or need a referral.

Benefits and Strategies for Home Ownership

You’ve been together through four years of college. Why not transition into your professional life along with your fraternity brothers, sorority sisters, or college roommates? Renting space to some of your best friends helps to defray your monthly expenses while paying down your mortgage and building equity.

 

You may also choose to purchase your home along with a trusted friend or family member. This can provide another source of income, helping you qualify more easily and helping to offset the cost of the monthly mortgage.

 

Delaying home buying because you might want to travel or you might transfer to a new city? No need. Purchase your home now and start building equity. If you find that your career takes you elsewhere, you can always rent out your home and have a property manager maintain it while you continue to build wealth.

Ready? Let’s get started!

Wherever you are in your college or post-graduate journey, there’s no time like the present to start thinking ahead to your home purchase. Let’s discuss the various strategies and financial products available to help you make your dreams of home ownership a reality. I’m here to help with expert guidance for your DC metro home purchase. Call 703-799-5626 for more information.

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Rates are subject to change.VA MC-928 | MD4272 | DCMLB3295 | KEVINS RETCHER 116922

Notice; Information about the author: Kevin Retcher is the Owner of First Meridian Mortgage since 1996 and can be reached at 703-799-5636, kevin@firstmeridianmortgage.com. His opinions are his and his alone, and not to be taken as legal advice. Always consult with a licensed professional. Also excuse grammar and spelling, I work with math for a living. © First Meridian Mortgage Corporation. NMLS# 180004 www.nmlsconsumeraccess.org, ©KSA Insurance agency, License NPN 8036794 VA License, Rates are subject to change without notice. Kevin Retcher is a licensed Realtor with Jobin Realty , Springfield Virginia, 703-642-8500