contributed by Brenda Lyttle
With the housing crisis in the US at its peak, housing loans are surprisingly made available at low down payments by various lending institutions across the country. Not only is it having a bad effect on the crisis but this has become something of a trend. Government institutions and Federal Housing Administration have introduced the practice of insuring loans with negligible down payments and private mortgagers have followed in their footsteps.
Even the bigger credit unions in the US are offering something called ‘zero down payment’ mortgages. If you are looking forward to cashing in on the latest trend that is gripping the housing loan sector, here are a few low down mortgages to look forward to –
- VA Loan – Zero Down– This loan is available only to veterans who qualify under Veterans Administration, now called Veteran Affairs. Basically, VA guarantees the loans that originate from the private lending institutions and no insurance is provided on the mortgage. The funding fee ranges around 2.15 % – 3.3% depending upon the veteran’s service area. This funding fee can be included into the loan payment program and be paid back accordingly.
- Department Of Agriculture – Zero Down – This has to be the most popular program for the spring as it ran out on all its money in the season. This is a rural development mortgage plan run by the Department Of Agriculture and is restricted to eligible areas only. Apart from that, the restrictions include income constraints too. This program is primarily meant to cater to buyers who are buying for the first time but in some rare cases exceptions may also be considered.
This program comes without insurance too but around 2% of guarantee fee is charged, which can be included in the loan payment plan.
- Federal Housing Administration – Low Down – Unlike the options mentioned above which are only restricted to a certain limited number of people, this down-payment method caters to majority of people. Also, it is not zero-down-payment based, like the others. The down rate is around 3.5% and FHS also charges a premium of 2.25% on the amount mortgaged. There is additional premium charge on minimum down payment loans.
When most of the low down payment options fizzled out during the crisis, FHA stayed strong and is now the market leader with around 30% of home loaners insuring their loans from FHA.
- Private Mortgage Insurance – Low Down – This costs more than FHA but if your down percentage is more than 10%, it happens to be cheaper than FHA. It is, simply put, a standard home loan with PMI. Also, it can be cancelled as early as 2 years after loan receipt unlike FHA where the time period is 5 years. It is also easier to acquire.
Most states and institutions have jumped into this low mortgage bandwagon, offering as little as 5% down rate. It would be wise to explore your options and try to get a zero down payment deal. If not, then the low down options are always available for your benefit.
Written by Brenda Lyttle. If you wish to learn more about mortgages, you should read this article on understanding mortgage points on the Bank of the Internet website.