First things first: The idea that you must put 20 percent down is a myth. The average first-time home buyer puts just 7 percent down.
Now that we got that out of the way, let’s move on to the types of loans available:
MORE OF A CONFORMIST?
These types of loans offer great rates, a variety of down payment options and flexible terms. Often known as “conforming loans” because they conform to standards set by Fannie Mae and Freddie Mac, these loans are offered by most lenders across the country, including banks, credit unions and mortgage companies.
Down payments as low as 3% (but anything less than 20% will require PMI)
For down payments of 20% or more, no upfront or monthly PMI
Unlike FHA loans, PMI is cancelable with 20% home equity
Available for a primary home, second home or investment property
Fixed and adjustable rates with loan terms between 10 and 30 years
Higher loan amounts available in high-cost counties
A recently reintroduced program by Fannie/Freddie, these loans are available to first-time home buyers and are cheaper and easier to use.
DID YOU KNOW? Requiring an 80% (or lower) LTV ratio (or in other words, at least 20% down) to avoid PMI is not law, but it is the practice of nearly all lenders.
NEED SOME FLEXIBILITY?
With low down payment requirements, ultra-lenient credit score standards and flexible income guidelines, the FHA mortgage makes homeownership available to a wide range of individuals, especially first-time home buyers.
Requires a down payment of 3.5%
Accepts credit scores as low as 580
Home must be owner-occupied for 12 months
Gifts can be used to cover 100% of the down payment and closing costs
Upfront MIP equal to 1.75% of the loan amount
PMI is permanent, unless refinanced
Limits apply to loan amount and home type based on county
Westchester County Limits
SINGLE FAMILY $1,089,300
Fairfield County Limits
SINGLE FAMILY $726,200
DID YOU KNOW? According to the National Association of REALTORS® , in 2019, 17% of all buyers and 25% of first-time buyers used an FHA loan to purchase a home.
Fannie Mae’s HomeReady™ Mortgage:
This loan allows a down payment of just 3% and permits “income pooling” for all members of a household, including parents, grandparents, relatives and working children.
Requires a credit score of at least 620
Borrowers who intend to occupy the property may only have a total of one other financed property (in addition to the subject property) at the time of closing
If all occupying borrowers are first-time home buyers, then at least one borrower must agree to complete an online homeowner education program
PMI is generally cancelable upon borrower's request when the loan balance drops below 80% LTV, or automatically when it drops below 78% LTV
Income limit for all loans is 80% of the area median income for the property’s location, including properties in low-income census tracts
Higher rates than an FHA loan
WANT A FIXER-UPPER?
203k Construction/Rehab Loans:
This is an FHA loan used to finance “fixer-uppers” and repairs at the same time. The total loan amount can include the financed purchase price and remodel costs. There are two options for the 203k Loan - Standard or Limited.
Only requires 3.5% down
Upfront MIP equal to 1.75% of the loan
PMI is permanent, unless refinanced
The home must be owner occupied for 12 months
For Limited 203k, there is a cap of $35,000 for cosmetic work and no structural or footprint changes are allowed. Standard 203k has no repair limit, so long as repair cost plus purchase price falls within the county's FHA lending limits.
Project must not take longer than 6 months to complete
Limited 203k is meant for basic and cosmetic repairs. Standard 203k allows for more extensive repairs such as structural repairs, room additions, and pools.
No DIY projects, must use approved FHA contractor
For Standard 203k, there is a longer timeline to close and more paperwork. Paperwork requirements are less intense for Limited 203k.
Lower credit requirement
Limits apply to loan amount and home type based on county (see FHA limits above)
Limited 203k requires that the home be habitable throughout the period of renovation. Standard 203k allows borrowers to add up to six months of mortgage payments to their loan for the period during which the home is uninhabitable.
Fannie Mae’s HomeStyle® Mortgage:
This loan allows you to buy and rehab a loan with only 5% down, but without the 1.75% upfront mortgage insurance premium required by FHA.
Reduced PMI with good credit
PMI is cancelable once equity reaches 22%
No restrictions on the type of home improvements
Can be used for primary residence, rental property or vacation home
Renovation costs may be approved up to the lesser of 75% of the purchase price plus renovation costs OR the as-completed appraised value
Home buyers with eligible military service history can qualify for a 100% loan backed by the U.S. Department of Veterans Affairs.
Low mortgage rates
15- and 30-year fixed loans available
No down payment required
No mortgage insurance
Lenient standard for credit scores
This loan targets home buyers who plan to live in rural and suburban areas and offers zero down payment loans to moderate-income applicants.
Low PMI fees
Lenient credit score requirements
Applicants must meet income limits
Buyers must purchase a home within USDA-eligible areas
We're not your typical real estate agents.As former city dwellers, we appreciate the qualities that make city lifestyle so unique, from the convenience of walking to your favorite restaurant or corner store to the vast and diverse cultural and entertainment activities. But we’ve also experienced the challenges and frustrations that are motivating you to seek change. During our transition from the city to the suburbs, we had the same thoughts, concerns and questions, prompting us to create a better way to navigate the suburban home buying journey for others.