Have you been dreaming about buying a home? A house is a huge purchase that takes a lot of time and money to invest. There are many financing options out there, but not all are available or helpful to all prospective homebuyers.
You might be able to make your dream come true and buy a home using one of many low-cost financing options available to Americans. These loans and rent-to-buy programs can help you secure a home for your family and start building up your wealth. Let’s take a look at some of the most popular low-cost financing options out there.
Many first-time homebuyers think the only way to get a mortgage is to pay 20% up front through a conventional loan. But the U.S. government has many loan options to make buying a home more affordable and accessible for people of various income brackets.
One of the biggest benefits of government-backed mortgage loans is that they often require low down payments, meaning you can often pay as little as zero dollars up front for your future home. Other perks include lower-than-market-average interest rates, so you pay less over time, and qualification flexibility, so you don’t need a perfect credit score or a six-figure job to get a mortgage.
While a government-back mortgage isn’t a loan directly from the government, the government guarantees the loan through a bank. The bank’s risk is reduced, and thus the interest, flexible qualification, and low down payment is passed on to you.
You can typically find government-backed mortgage options through regular mortgage lenders and banks. When reviewing your loan options with a lender, ask whether they offer government-backed loans and let them know you want to apply. Most lenders tell you about these options upfront if they believe you may qualify.
Here are some options for government-backed mortgages:
- Veterans’ Administration Loans: If you or your spouse are a veteran or active duty military personnel, you could qualify for a VA home loan. VA loan rates depend on your credit score, but most lenders don’t require a down payment, have low interest rates and closing costs, do not require mortgage insurance, and may not have credit score minimums.
- Federal Housing Administration Loans: A government-backed FHA loan, also known as a Section 203(b) loan, helps people with a credit score as low as 580 and a high debt-to-income (DTI) ratio purchase a home. You may have a low down payment and pay for mortgage insurance. You can get pre-approved for an FHA loan by working with one of the best FHA mortgage lenders.
USDA Loan: The U.S. Department of Agriculture backs mortgages for people to purchase rural and rural-suburban homes. These require a minimum credit score of 640, but you don’t need a down payment.