For decades a 20% down payment was the prevailing standard in the U.S. mortgage industry. The 20% down payment served a twofold purpose. The borrower’s 20% equity position lowered the chances of the lender suffering a loss in case of default. Secondly, defaults were less likely because of the borrower’s substantial stake in their property.
The 20% down payment has been replaced to a large degree by mortgage insurance, which compensates the lender for their loss if the borrower defaults.
These days there are a number of mortgage products available to borrowers with little or no down payment. Some are coupled with grants or other loan products, and virtually all have mortgage insurance in one form or another.
If you need a low or no down payment option, consider the options below:
CalVet – CalVet Home Loans are administered through the California Department of Veteran Affairs. With few exceptions every honorably discharged veteran that resides in California is eligible for CalVet. An attractive no down payment option is offered.
USDA – USDA mortgage loans are guaranteed by the United States Department of Agriculture and require no down payment. Eligible properties include single family residences and farms. The definition of rural inclues many exurban and suburban neighborhoods nationwide. Geographically, 97% of the USA is eligible for USDA financing.
FHA + Easy Access – This is our standard FHA loan program coupled with an Easy Access 3% second trust deed. Qualified borrowers will only need one-half of one percent down (that’s only $1,350 down on a $270,000 loan).
FHA + DPAP – (Down Payment Assistance Program, Funded by Non-repayable Grant) Our DPAP product gives the low-cash buyer even more flexibility. In order to lessen the gap between loan amount and sales price, we’ll arrange a grant that does not have to be repaid. The grant is up to 5% of the loan amount. Qualified borrowers will need as little as $0 down and may also receive 1.5% of the loan amount toward their closing costs.
3% Down – Also known as the Conventional 97 – This is a Fannie Mae product that requires only 3% down, The 3% down payment can come from a gift (blood relatives or relatives-by- marriage only). This product is ideal for the borrower who does not want a government loan or who would like to eliminate value drops to 80%.
To read more about these products please visit our website at YourMortgageBlog.com and click on the Low or No Down Payment Loans tab.
This seems like a no-brainer, but like so many other things in the mortgage business it really isn’t.
Most of us have obligations that require some form of monthly payment. A typical scenario involves a car payment that’s due on a certain date, let’s say the first of the month.
Many installment agreements also include a 10 day grace period and a penalty for late payments. Late payment penalties are usually about 5% of the monthly payment, and the grace period is simply a period of time during which a payment can be made, after the date it’s officially due, without incurring a penalty.
Let’s assume the payment is $300. In accordance with the installment agreement the payment is due by the first, but because there’s a grace period, as long as the payment is made on or before the 10th there’s no late fee. However if the payment is received after the 10th, there’s a 5% ($15) late fee added to the $300 payment for a total amount due of $315.
If the payment is made on the 11th and the borrower is assessed the $15 late fee, is the payment late? Yes and no. Under the installment agreement the payment is late because it was not “paid as agreed” (not received within the grace period).
Perceived failures to pay on time can be a significant barrier to home ownership because of the way it affects the psyche. Unaware of underwriting guidelines, many qualified people don’t apply for a mortgage falsely thinking their credit report is riddled with late payments when in fact it’s not.
If you’re uncertain as to how a financial event in your life will impact your ability to get a home loan, don’t assume, talk to a mortgage professional. You may be pleasantly surprised. Remember, we’re here to help you, not to judge you.