When buying a home, it’s ideal to have a considerable downpayment to make your offer more competitive, reduce your monthly payments, and avoid costly fees such as private mortgage insurance. However, if you don’t have a sizeable downpayment, you may still be able to qualify for a no-money down or low-money down loan program. Today I’m pleased to have Rick Scherer of MSA Mortgage and Real Estate Radio Boston and Elise Bare of Residential Mortgage Services with me to navigate the different loan options.
Question: Are there really still viable low- and no-money down programs available to home buyers?
Answer: “There are multiple different options available for low- and no-money down loan programs,” said Rick Scherer. “This includes government-sponsored programs such as FHA and local programs such as Mass Housing. There are also no-money down programs available from the USDA and Veteran Affairs (VA). The largest lending agencies such as Fannie Mae and Freddie Mac also allow downpayment as low as 5 percent.”
Question: How do home buyers decide which of these programs is right for them?
Answer: “The FHA program allows for some bruised credit and also higher debt-to-income qualifications, but this program comes with higher fees and monthly payment,” said Elise Bare. “The Mass Housing loan caters to the low-to-moderate income buyer with a minimum credit score of 680. They’ll need to meet some income guidelines as well.”
The VA program is offered to veterans,” said Bare. “It’s a very competitive program with low rates and no monthly private mortgage insurance.”
“The USDA program is available to income eligible borrowers who are purchasing a home in certain locations,” said Bare. “It is offered at a very competitive low rate and low monthly private mortgage insurance rate.” Notably, homes in many area communities in Middlesex county, including areas of Holliston, Hopkinton, and Sherborn, are eligible.
“For those looking to put 5 down, a standard Fannie Mae loan would be more beneficial, as long as the buyer’s credit score is strong,” said Bare.
Question: What are the pros and cons of getting a no- or low-money down program?
Answer: “Some programs have high monthly and up-front fees,” said Scherer. “For some people it may be worth the costs if it’s the only way to buy a home.”
Question: What are some common misconceptions about these programs?
Answer: “A lot of people think these programs are hard to qualify for,” said Bare. “That really isn’t the case if you are working with a lender who knows how to navigate the program effectively.”
Question: What advice do you have for home buyers who are considering these programs?
Answer: “It’s a good idea to work with a lender who offers all of these programs,” said Scherer. “If not, they might try to push a loan program that they offer but might not be the best option for your personal situation.”
Reprinted from my MetroWest Daily News column in Metrowest Homes, a real estate resource for residents of Dover, Holliston, Hopkinton, Sherborn, Southborough, Sudbury, Wayland, Westborough, Weston & beyond.
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