What’s the biggest obstacle to homeownership? According to a recent survey, “saving enough for a down payment” comes at the top of the list. A whopping 55% of prospective homebuyers cited this as their main stumbling block.
And with the continuing growth of home prices, things aren’t getting any easier. In fact, homeownership rates reached a 20-year low last November, but it wasn’t always like this.
A decade ago, many lenders were offering easy, no-money-down mortgages. However, after the financial crisis, mortgage standards have become more restrictive. A typical mortgage now requires a 20% down payment.
Here’s the good news. If you have decent credit and a steady income, you might qualify for a number of specialized programs that require no or very little down payment.
First, there’s the USDA loan, which is valid for homes in certain regions, such as rural and suburban areas. With zero money down and lenient credit requirements, the USDA loan can be a great choice for many homeowners.
Second, there’s the VA loan, which you can apply for if you or your spouse served in a branch of the military. It’s possibly the most generous zero-money-down mortgage because of low interest rates and low closing costs.
“If you have decent credit and a steady income, you might qualify for specialized programs that require no or very little down payment.”
Third, there’s the FHA loan. It requires a 3.5% down payment — still drastically more achievable than the 20% required for a conventional mortgage.
Finally, there are a number of credit unions and first-time homebuyer programs that might apply to your particular situation. There’s one important thing you should know. If you get one of these no-money-down mortgages, chances are good you will be required to pay private mortgage insurance, which can drive up your monthly payments.
Fortunately, private mortgage insurance will disappear after your mortgage balance is under 80%. Also, the money you do pay will be tax deductible in most cases. In short, there are lots of options to make owning a home a reality for you, even if you haven’t saved up tens of thousands of dollars.
If you need more advice on getting a no-money-down loan or you have any other questions about the San Diego market, don’t hesitate to give me a call or send me an email soon. I’d be happy to help!