Thursday, July 7th, 2022 by David Forbord
Greetings from Racquet Club Realty at The Racquet Club at Scottsdale Ranch! I am excited to be part of the RCR team and come alongside homeowners in the process of selling their homes.
I specialize in condo and townhome sales with six years in the Los Angeles real estate market. I was also CFO for a real estate brokerage and have served as an Investment Property Sales Specialist. My work as a CPA also makes me uniquely qualified to navigate the financial territory inherent in real estate buying and selling.
Scottsdale has been my home now for six years, and I am familiar with what sets this wonderful community apart as an ideal market.
I look forward to assisting you with some of what I have learned in real estate through the years. To start, please enjoy this great article regarding military veteran home buyers.
Saving for a down payment is often the biggest roadblock for first-time home buyers. The good news is, that you don’t need to put down 20% to buy a home.
In fact, you may be able to buy a house with no money down if you served in the military. Down Payment Assistance programs can also make it possible to buy a house with very little money out of pocket.
There are two government-backed loans that allow you to buy a home with no down payment.
If you or your spouse are a qualifying current service member or veteran, you may be eligible for a VA Loan guaranteed by the Department of Veterans Affairs.
What to expect: VA loans require no minimum down payment or private mortgage insurance, but you do have to pay a funding fee, which covers the cost of foreclosure in case you default on the loan.
While the VA doesn’t set a minimum credit score or income requirement, lenders do. The property also has to be your primary residence and meet the VA’s minimum safety standards.
USDA Loans are zero-down mortgages backed by the U.S. Department of Agriculture for low- and moderate-income home buyers in eligible rural areas.
What to expect: While USDA loans don’t technically require mortgage insurance, you are required to pay a guarantee fee, which protects the lender in the event of foreclosure.
The USDA doesn’t have a minimum credit score requirement, but lenders often require a score of at least 640.
If you are a medical professional, you may qualify for a physician loan with no down payment.
What to expect: Physician loans don't require private mortgage insurance, and typically have flexible proof of employment requirements and accommodate higher debt-to-income ratios because of the large amount of medical school debt the borrower may have.
Government loans aren’t the only game in town when it comes to no-down-payment home loans. Some, but not all, lenders offer their own 100% mortgage financing. These loans aren’t common because of the risk involved for lenders; they can lose a lot of money if you default on the mortgage and end up in foreclosure.
What to expect: Depending on the mortgage lender, they may require that the loan is for your primary home, that you live in a certain area, or that you have an excellent credit score. If your mortgage lender is a credit union, you’ll need to be a member.
While you may feel like you won the lottery with a no-down-payment loan, there are advantages and disadvantages:
You don't have to save up as much money.
You can become a homeowner sooner.
You'll have more cash in your pocket for upgrades or expenses.
You'll have little or no equity in your home for the first few years of homeownership.
You may have to pay mortgage insurance premiums and higher monthly mortgage payments, interest rates or fees.
You may still have to bring some money to the table to pay closing costs or make an earnest money deposit.
If you don’t qualify for a no-down-payment mortgage, the next best thing could be a loan that requires a small down payment. The minimum requirements vary depending on the type of mortgage and the lender you choose.
FHA loans, which are backed by the Federal Housing Administration, require a down payment of as little as 3.5% for borrowers with a credit score of 580 or greater. But if your score falls between 500 and 579, you will have to put down 10%.
What to expect: In order to qualify for an FHA loan, there are debt-to-income ratio requirements, and the property must meet FHA’s minimum standards. You’ll also have to pay for FHA mortgage insurance.
Some conventional mortgages, such as HomeReady and Home Possible loans require as little as 3% down and are designed for low-income home buyers.
What to expect: Fannie Mae’s HomeReady mortgage allows a credit score as low as 620. With Freddie Mac’s Home Possible loans, you need a score of at least 660.
While you have to pay private mortgage insurance, both of these low-down-payment conventional loans allow you to cancel them when your equity reaches 20%. If all borrowers on the loan are first-time home buyers, at least one person has to take a homeownership education course to qualify.
If you are a teacher, police officer, emergency medical technician, or firefighter, the Good Neighbor Next Door program may help you buy a home with as little as $100 down.
What to expect: Even if you’re in a qualifying profession, Good Neighbor Next Door mortgages can only be used to buy foreclosed homes in designated revitalization areas. The supply of houses is limited, and you must commit to using the home as your primary residence for at least three years.
If you don’t initially qualify for a no or low-down-payment mortgage, don’t despair. There are many state and local first-time home buyer programs that offer down payment and closing cost assistance.