YES - You Can Buy a Home With Little to No Money Down!! (So What is Holding You Back??)

For many people the toughest hurdle in becoming a homeowner is coming up with the down payment. With home prices the way they are, coming up with 20% to put down is an insurmountable obstacle for a large number of potential homeowners. Fortunately there are ways to purchase with much lower down payments (and in some cases no down payment)! Below I will detail some of the programs that offer flexibility with respect to down payments as well as flexibility with respect to credit scores (and other underwrtiting requirements).

• VA Loans – If you are an active duty service member, veteran, or eligible spouse you may qualify for a VA loan which offers 0% down payment. In general, you will need a credit score of at least 620 and have a debt to income (DTI) ratio of 41% or better. The home will also need to be your primary residence.

• USDA Loans – That’s right. You don’t need to be a farmer to get a mortgage from the Department of Agriculture!! The USDA offers a mortgage program with 0% down! These loans are targeted toward moderate to low income individuals. As such there are some income limitations. They are also given to individuals purchasing a home in rural (as well as tons of suburban areas). It is actually surprising the large expanse of areas that are eligible in MA and NH. In general you need a credit score of 640 or better with a DTI of 41%. For more information check out the USDA eligibility website at https://eligibility.sc.egov.usda.gov/eligibility.

• Mass Housing – If you get a Mass Housing mortgage (you go through an approved lender for this just like any other mortgage) you may be eligible for their down payment assistance program (MassDREAMS) which will provide assistance of up to 10% of the purchase price toward your down payment! The program offers a maximum amount is $50,000 in Attleboro, Barnstable, Brockton, Chelsea, Chicopee, Everett, Fall River, Fitchburg, Framingham, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Randolph, Revere, Salem, Springfield, Taunton, Westfield, and Worcester as these towns were said to have had been adversely affected by the COVID pandemic. All other towns have a $30,000 maximum. Still amazing.

• FHA Loans – FHA loans require a 3.5% down payment but allow for much lower credit scores than conventional mortgages. With an FHA loan you can have a credit score as low as 580 with 3.5% down. You can also have a credit score between 500 and 579 but it will require 10% down. You will generally need a DTI of 43% or better but higher DTI’s can be approved with compensating factors.

• Conventional Lenders – Most conventional lenders will require at least 3% down for a mortgage. Fannie Mae (backers of conventional mortgages) require a minimum credit score of 620 but most lenders require something a little higher. Most lenders will allow assistance from parents or relatives but, importantly, they will generally require a “gift letter” to show that it is not a loan. Be careful when preparing to buy a home. In general do not borrow large amounts of money during this time as it will increase your debt to income ratio and could affect your eligibility.

401K’s can also be a great asset to use toward a down payment for a conventional mortgage. Check with your plan administrator but you can generally borrow from these to purchase a home (in which case you are paying yourself back and not a third party).

So home ownership could be closer than you think! Rents are going through the roof! Why pay rent when you can own? Please contact me if you have any questions regarding these programs, the home search process, etc. I would be happy and excited to guide you through the home buying process.