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Overview of Low / No Down Payment and First-Time Home Buyer Mortgage Programs

Overview of Low / No Down Payment and First-Time Home Buyer Mortgage Programs

    There are several government-backed and conventional mortgage programs designed to help home buyers obtain mortgages.  The table below summarizes no / low down payment, first-time home buyer and mortgage assistance programs and explains how they can work for you.  Click on the program title to review more detailed information about each program.

    You do not need to be a first-time home buyer to use all of these programs, such as the FHA and VA Programs, but many of them are especially helpful for first-time home buyers because they allow you to buy a home with little or no down payment or help borrowers pay for mortgage closing costs.

    Some no / low down payment, first-time home buyer and mortgage assistance programs are administered by state housing financing agencies or city and county housing commissions and program offerings and requirements may vary by state or county.  In some cases borrowers can combine state and local mortgage programs with other mortgage programs such as the Fannie Mae HomeReady Mortgage Program or FHA Mortgage Program to provide additional buyer assistance.  For example, eligible borrowers may be able to combine a local Down Payment Assistance Program or Closing Cost Grant Program with a low down payment conventional mortgage or FHA mortgage to reduce their required down payment or offset mortgage closing costs.

    • Click STATE PROGRAMS to find government-backed mortgage programs in your area
  • Summary of No / Low Down Payment, First-Time Home Buyer and Mortgage Assistance Programs
  • 1% Down Payment Programs
    • Mortgage programs that enable borrowers to buy a home with a down payment of 1%
    • Usually include down payment assistance program to provide additional equity to home buyer when the mortgage closes
    • Conventional as well as government-backed mortgage programs
    Fannie Mae 3% Down Payment / 97% LTV Mortgage Program
    • Fannie Mae offers a conventional mortgage program that allows first-time home buyers to buy a new home with a down payment of 3.0% of the property purchase price
    • Also known as the 97% LTV mortgage program, the program is similar to the Fannie Mae HomeReady Program but has a stricter borrower credit score requirement, does not have a borrower income limit and does not require pre-purchase home buyer counseling
    Fannie Mae HomeReady Program
    • Fannie Mae offers the HomeReady Mortgage Program to help home buyers with limited resources and alternative sources of income afford mortgages
    • The program enables you to buy a home with a down payment as low as 3.0% of the property purchase price and no minimum borrower contribution
    • The program allows lenders to include or consider income from non-occupant borrowers (parents), non-borrower household members (relatives) and boarders, improving your ability to qualify for a mortgage
    • Compared to other programs, the HomeReady program has more flexible qualification requirements especially as it relates to a borrower's credit profile. Borrowers with lower credit scores or limited or no credit histories may be eligible for the program
    Freddie Mac Home Possible Program
    • The Freddie Mac Home Possible program enables home buyers to buy a home with a down payment as low as 3.0% of the property purchase price and no minimum borrower contribution
    • The program allows lenders to include rental income from the property you purchase and occupy, aiding your ability to qualify for a mortgage
    • Potentially reduced interest rate for borrowers with low incomes or for properties located in designated areas
    Bank of America Affordable Loan Solution Program
    • The B of A Affordable Loan Solution Program enables borrowers to buy a home with a down payment as low as 3% and no personal financial contribution
    • The program does not require the borrower to pay private mortgage insurance (PMI) or an FHA Mortgage Insurance Premium (MIP)
    • Potentially reduced total monthly housing expense for borrower
    Chase DreaMaker Mortgage Program
    • The Chase DreaMaker Mortgage Program enables borrowers to buy a home with a down payment as low as 5.0% of the property purchase price and no minimum borrower contribution
    • The DreaMaker Program offers competitive mortgage rates as compared to conventional programs and potentially lower monthly private mortgage insurance (PMI) fees
    • The program applies more flexible borrower qualification requirements than some conventional low down payment mortgage programs
    Wells Fargo yourFirst Mortgage Program
    • The Wells Fargo yourFirst Mortgage Program enables borrowers to buy a home with a down payment as low as 3% and no personal financial contribution
    • The program is designed to be less complex and more borrower-friendly than other low / no down payment mortgage programs
    • Borrowers that make a down payment of less than 10% may be able to reduce their interest rate by .125% by completing a homebuyer education class
    Your Path Mortgage Program
    • Offered through a collaboration between Freddie Mac, Alterra Home Loans and New American Funding, the Your Path Mortgage Program enables borrowers to buy a home with a down payment as low as 3.0% and no minimum borrower contribution
    • Features flexible borrower qualification requirements including using income from non-borrower household members for mortgage qualification as well as enhanced flexibility for self-employed borrowers and borrowers with seasonal or second jobs
    • The Your Path Program addresses the growth in multi-generational households as well as the increase in borrowers with non-traditional sources of income
    FHA Mortgage Program
    • The Federal Housing Administration (FHA) offers government-backed mortgage programs designed to help low-income individuals and individuals with limited funds buy a home by enabling them to purchase a property with a down payment of only 3.5%
    • Although you do not have to be a first-time home buyer to qualify for the FHA Mortgage Program, the program works very well for first-time home buyers
    VA Home Loan Program
    • The U.S. Department of Veterans Affairs (VA) offers mortgage programs for active and retired military personnel, including individuals in the reserves and national guard, that enable them to purchase a property with no down payment and at favorable interest rates
    USDA Home Loan Program
    • The USDA Home Loan Program is designed to help individuals with low-to-moderate incomes obtain mortgages and buy homes located in rural areas or small communities with no down payment
    • The program allows qualified borrowers to obtain USDA-backed mortgages at favorable interest rates to finance 100% of the purchase price (plus certain fees and expenses) of eligible properties located in USDA-designated rural areas
    NACA Purchase Mortgage Program
    • NACA, the Neighborhood Assistance Corporation of America, offers a home purchase mortgage program designed to make home ownership more attainable for more people, especially people with limited funds and challenging credit profiles
    • The NACA home loan program enables eligible borrowers to purchase a home with no down payment and no closing costs using a fixed rate mortgage with an at or below market interest rate
    • The NACA program is available to borrowers of all income levels but there are limits on the location and value of properties eligible for the program
    FHA 203(k) Home Improvement Loan Program
    • The FHA 203(k) Loan Program enables home owners to finance both the purchase of a home as well as the cost of significant rehabilitation, remodeling and repairs to the home with one FHA mortgage
    • The FHA 203(k) Loan Program allows borrowers buying a home to finance the cost of significant home remodeling or rehabilitation without having to obtain a separate construction loan which can be costly, complicated and time-consuming to arrange
    • Instead, the FHA 203(k) Loan Program enables borrowers to finance the purchase of a home and pay for a significant (greater than $5,000) home improvement project with a single FHA mortgage
    • Although you do not have to be a first-time home buyer to qualify for the FHA 203(k) Program, the program works well for first-time home buyers looking to buy a "fixer-upper"
    Fannie Mae HomeStyle Renovation Program
    • The Fannie Mae HomeStyle Renovation Mortgage program is similar to the FHA 203(k) program and enables borrowers to purchase a home that needs renovations or refinance the mortgage on their existing home and include funds for renovating the property in the loan amount
    • Unlike the FHA 203(k) program, the Fannie Mae HomeStyle Renovation Mortgage program does not charge a one-time and ongoing FHA mortgage insurance premium, which are extra costs for the borrower
    • Additionally, the Fannie Mae HomeStyle Renovation Mortgage program applies to both owner-occupied and investment properties as compared to the FHA 203(k) program that only applies to owner-occupied properties
    Mortgage Credit Certificate (MCC) Tax Credit Program
    • A program that provides qualified borrowers a federal income tax credit of 15% to 50% of their annual mortgage interest expense as long as the buyer lives in the home
    Down Payment Assistance Program
    • Program that provides first-time home buyers with a silent second mortgage, also know as a subordinate loan, to assist them with their down payment or closing costs
    Closing Cost Grants
    • Programs that provide grants to help home buyers pay for closing costs
    Individual Development Accounts
    • An Individual Development Account, or IDA, is a special savings account to help people with low incomes save money for a specific purchase such as buying a house, paying for school or starting a small business
    Contract for Deed
    • With a contract for deed the property seller provides a seller loan for the buyer to purchase the property according to terms outlined in a contract. The buyer is usually not required to make a down payment
    • The buyer takes possession of the property when the purchase transaction closes but does not legally own the property until the terms of the contract are fulfilled which usually happens when the seller loan is repaid in full. The buyer is responsible for paying property taxes, insurance and for any property repairs even though he or she does not legally own the property
    • Contract for deed transactions expose borrowers to significant risks they should fully understand before using one to buy a home
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    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
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    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
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    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
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    Homeowner Association Fee More Info
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    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
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    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
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    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
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    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
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    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
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    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

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