The COVID-19 pandemic has affected many people’s financial situations. Millions of people have lost their jobs or experienced pay or hours cuts. For many, this has meant putting their home buying dreams on hold. However, First Fidelis wants to discuss options that homebuyers have to qualify for a home loan with no down payment.
FHA loans are popular because the Federal Housing Association insures them. This loan program is always popular among first-time homebuyers because of the flexible guidelines. For individuals with credit scores of 580 or higher, FHA loans have no down payment requirements during the COVID-19 pandemic. If your credit score is lower than 580, you still may be able to qualify for an FHA loan with a down payment of around ten percent. The FHA is an insurer, not a lender, so you will need to find an FHA-approved lender in your area.
Most veterans and active-duty military members can qualify for VA loans. This loan program offers low-interest rates and does not require a down payment or mortgage insurance. VA loans are more forgiving on DTI ratios, allowing veterans and military members who might not qualify for conventional loans to get a mortgage even with a higher DTI. You can also use a VA loan to both buy OR build a home. For those who are eligible, VA loans are a great mortgage option during the pandemic.
USDA home loans are for homebuyers in low- to moderate-income households. This type of home loan has certain criteria to qualify, including a 640 or better credit score. Borrowers will also need to live in a specific area, often rural areas, but sometimes suburban areas will qualify if they meet other criteria. However, USDA loans are a great option for homebuyers who have been hit hard financially during the COVID-19 pandemic.
Lastly, conventional loans are an option for homebuyers. While conventional loans don’t fall in the no-down-payment category, you can qualify for a conventional loan for as little as three percent down.
The government does not back conventional loans, so they often have more requirements. Typically, it is recommended to have a down payment of 20 percent of the total value of the home you’re purchasing for conventional loans. However, this is a lot of liquid cash for anyone to have. If you decide to put three percent down, your lender will require you to get private mortgage insurance (PMI). PMI protects the lender if you stop making payments on your loan. A PMI is usually added as a condition to loan agreements with down payments of less than 20 percent.
Buying a Home During the Pandemic
While it may seem like an odd time to purchase a home during a pandemic, many homebuyers choose to take advantage of the low-interest rates and flexible loan requirements right now.
First Fidelis LLC. is a mortgage brokerage firm dedicated to helping home buyers in the Kansas City area find and qualify for home loan programs. We offer all of the mortgage options listed above to homebuyers seeking a home loan with no down payment. Our mortgage brokers are available to help you find the most appropriate loan for you and your family. To start working with one of our mortgage brokers, call us today at (913) 205-9978.