Buying a house with less than 10 percent down used to be difficult, or in some cases impossible. These days, though, there are special loans that can let you put less than 10 percent down on a house, even if you have bad credit or have been turned down before. Here are four special loans that could help you buy your next home with less money upfront.
1) VA loans
If you’re a veteran or active duty military member, you may be eligible for a VA loan. These loans are backed by the Department of Veterans Affairs and can be used to buy a primary residence. VA loans require no down payment and no monthly mortgage insurance premiums.
You may be able to get a VA loan even if you have bad credit. The minimum credit score for most VA lenders is 620, but some lenders may require a higher score.
2) USDA Rural Development loans
If you’re looking to buy a home in a rural area, you may be eligible for a USDA Rural Development loan. These loans are available to low- and moderate-income buyers, and they can help you get into a home with little money down. With these loans, you can put as little as 0% down, and you may even be able to get help with your closing costs. Plus, there’s no private mortgage insurance (PMI) required with these loans.
In order to qualify, you must have a credit score of 640 or higher, moderate income, and the property must be located in an eligible area. Plus, the property must be your primary residence. There is also no limit to how much money you can borrow through a USDA loan. If all of these requirements apply to you, consider this type of loan before looking at others.
3) FHA loans
FHA loans are available to all qualified buyers, not just first-time homebuyers. In addition to a lower down payment, you’ll also need a lower credit score to qualify for an FHA loan. With an FHA loan, you can put as little as 3.5 percent down on a house. The government insures the loan, which protects the lender in case you default. FHA’s mortgage insurance premiums are generally less than private mortgage insurance premiums and last only 30 years instead of 30 years. One downside: If you sell your home within that time frame, you have to pay back some of the money you borrowed.
You may be able to get a VA loan even if you have bad credit. The minimum credit score for most VA lenders is 620, but some lenders may require a higher score.
4) USDA home loans
The United States Department of Agriculture (USDA) offers home loans with very low-interest rates and zero down payments for eligible rural and suburban homebuyers. USDA home loans are sometimes called rural development loans, but they’re available in many areas that aren’t necessarily rural. In order to qualify, you must have a credit score of 640 or higher, a moderate income, and the property must be located in an eligible area. Plus, the property must be your primary residence. There is also no limit to how much money you can borrow through a USDA loan. If all of these requirements apply to you, consider this type of loan before looking at others.