In 2024, new homeowners are seeing mortgage interest rates have more than doubled since 2021, making the dream of home ownership with the traditional down payment of 20% seem like a bridge that is very far.
However, many options do not require 20% down. Some loan programs now allow for a much lower down payment, requiring as little as 3% in cash. These options significantly ease the burden for homebuyers, especially first-timers.
Understanding 3 Percent Down Mortgage Options
These low down payment mortgages are often part of special programs, typically targeting first-time homebuyers or those who have not owned a home in the recent past. Here is a closer look at these options:
1. Conventional 97
• Backed By: Fannie Mae
• Key Features: Only 3% down is required; the down payment can be a gift, grant, or other assistance.
• Qualifications:
• Must be a first-time homebuyer or not have owned a home in the past three years.
• Homebuyer education course required for all first-time buyers.
• Minimum credit score of 620.
• The home must be a primary residence.
• Conforms to loan limits (e.g., $766,550 for a one-unit property in most areas).
• Additional Info: Requires private mortgage insurance (PMI) until 20% equity is reached.
2. Fannie Mae’s HomeReady Program
• For a wider range of properties, including multi-family units.
• Qualifications:
• Open to those who have not owned a primary residence in the past three years.
• Credit score minimum of 620.
• Income cannot exceed 80% of the area’s median income.
• At least one unit must be the owner’s primary residence.
• Unique Feature: Counts rental income towards income requirements; down payment can be entirely from gifts or assistance.
3. Freddie Mac’s HomePossible Program
• Distinctive Feature: Allows non-occupying co-borrowers to contribute to the down payment.
• Qualifications:
• Homeownership education for first-time buyers.
• Credit score of 660 or above.
• Income limits apply.
• Must live in the home as a primary residence.
• Additional Info: PMI is required until 20% equity is achieved.
4. HomeOne by Freddie Mac
• Target Audience: First-time homebuyers and those looking for cash-out refinances.
• Qualifications:
• At least one applicant must be a first-time homebuyer.
• Usable credit score required.
• Property must be a single-unit primary residence.
• No Restrictions: No income or geographical limitations.
Other Low-Down Payment Options
• FHA Loans: Minimum 3.5% down. Available to a broader audience, including those with lower credit scores.
• USDA and VA Loans: No down payment required, specific to rural area borrowers (USDA) and military personnel (VA).
The path to homeownership in 2024, despite the daunting landscape of high-interest rates and challenging savings goals, is made smoother with these innovative low-down payment mortgage options. Whether you are a first-time homebuyer or someone looking to re-enter the housing market, these programs offer hope and an opportunity to achieve the dream of owning a home. Fill out our easy pre-qualifier on our website and we can see what program best fits your needs!
