In this video, Mary Catchur reviews several of these low down payment home loan products and announces a new Freddie Mac program that allows for a 1% down payment.
Mary discusses FHA, Conventional, USDA, and VA mortgage products, while talking about some of the qualifications for these mortgages.
Video Transcript is Below
Hello. I’m Mary Catchur; I’m the owner of Marimark Mortgage. Today I want to talk to you about the various low down payment options for mortgage programs. There are FHA products and there are also conventional products.
I’ll talk first about FHA. It’s probably one of the most well-known products for its low down payment option. It allows buyers to purchase with 3.5% down. However, a lot of people don’t realize there are actually conventional products that also even allow you to buy with even 3% or 5% down. Many still think of a conventional loan as requiring 20% down, but that’s no longer true.
So, how do you determine whether the best product for you is an FHA or conventional loan? Well, many factors are involved in that, and a mortgage broker can help you determine that.
Credit Score and Debt-To-Income Ratio
Some of the main things that we’re going to look at are credit score and debt-to-income ratio. On an FHA loan, you can often go with a little bit lower credit score and a higher debt-to-income ratio. If that’s your situation, then that may be the best option for you. Conventional loans are going to require a little bit higher credit score and lower debt-to-income ratio. So we would take a look at both options, and calculate the differences, and see what results in the best payment for you.
Mortgage Interest Rates
The interest rates are generally going to be lower on an FHA loan, however, oftentimes, the mortgage insurance is higher.
The other disadvantage of an FHA loan is that that mortgage insurance is very difficult to remove. With the newest requirements on FHA, you may even have to keep that on there for the full 30-year term of the loan. On a conventional product, if you have mortgage insurance, which is always going to be required when you have less than 20% down, you can at some point get that removed. By law, it has to come off once you reach 78% of the original value. So that’s one of the benefits of going conventional.
Conventional Mortgage Options
There are a few different options under conventional programs. When we talk about conventional programs, we’re talking about Fannie Mae and Freddie Mac, and they each have their own versions of the down payment programs. Generally, 5% has been the main product under the conventional loan programs. But recently they’ve also come out with some that are allowing 3% down. The 3% programs are primarily for first time home buyers and have some income limitations on them. Again, a mortgage broker can help you determine if you fit into one of those programs, but if not, then there’s still the 5% option, and of course, all of these will have mortgage insurance. There’s also a new program that’s just coming out under Freddie Mac, that’s going to allow for 1% down payment.
USDA Mortgage and VA Mortgage
In addition to just the FHA and conventional programs, there are a few other programs you may be able to get into for limited criteria. One of them is the USDA program. USDA still offers a 0% down payment. In that situation though, you have to purchase specific properties that are in that USDA territory. You also have limited income requirements on those as well. There’s also the VA loan for veterans which is still 0% down. So that’s another great option for our veterans.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients to lower their monthly mortgage payments.