Can I Purchase A Home with Little to No Money Down?

Can I Purchase A Home with Little to No Money Down?

By Claren Walker

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Purchasing a home used to require large down payments and stellar credit. The Federal Housing Administration (FHA) was created in 1934 to encourage homeownership by reducing the requirements to get a mortgage loan, as many Americans struggled to satisfy these requirements.  The purpose was to improve housing standards and conditions, provide an adequate home financing system through insurance of mortgage loans, and to stabilize the mortgage market.

This Government backed mortgage loan program is much more flexible than conventional loans, making them very popular among first-time buyers. The FHA insures these loans, so if the borrower defaults on the loan the FHA pays the lender the amount owed on the home. 

With a 620-credit score, you can qualify with a 10% down payment. 3.5% of the home purchase price is needed as a down payment, and most lenders require a 620-640 score or higher. FHA loans come with multiple mortgage terms to choose from. 30-year and 15-year fixed-rate mortgage loans are the most popular. 15-year fixed-rate mortgage will have a highly monthly mortgage payment, but you will save thousands on interest in the long-run!

Use gift funds for the down payment to put zero down!  FHA allows you to use gift funds for 100% of the down payment amount. You can have a friend, relative, or company gift you the money for the down payment, so you’ll need no money down! 

FHA loans are easy mortgage loans to qualify for, but you have to consider your personal situation. FHA-insured loans offer an easy solution for new homeowners and people who can't afford to make big down-payments on conventional loans. In a nutshell here are the benefits of utilizing an FHA loan:

·       Low money down. A 3.5 percent down payment will get you started with an FHA loan.

·       Gifted down payment. Monetary gifts can be used toward your FHA loan down payment or closing costs.

·       Lower credit score requirements. Credit score requirements are much more relaxed with an FHA loan

·       No early payment penalties. Pay it back early if you can, as there are no early repayment penalties, like there are with some conventional home loans.

RH Luxe Group has several relationships with some of the best loan officers Denver has to offer!  Please speak with a loan officer to understand your options and what will be best in your situation!  We are all here to help!

Adriana Johnson