For home buyers these days one of the major questions has to do with how much money they need to save in order to buy a home. The answer to the question depends on whether you are a Minnesota First Time Home Buyer or if you have a home to sell. While there have been major changes in the mortgage market in recent years, there are still plenty of low down payment options.
No Down Payment Loans
In some limited instances, home buyers can still find home loans which required no down payment. VA loans still require no down payment but at least one of the occupying buyers must be an eligible veteran. This type of loan has a great advantage in that not only is there no down payment required but the buyer can ask the seller to pay their closing costs as well.
Another zero down payment loan is available from the USDA. These loans, also known as Rural Development loans, are an excellent choice but are limited by location. The property must be considered to be in a rural location. Generally you would need to buy as far north as North Branch, Isanti, Cambridge or Zimmerman. In the west you would have to buy as far out as Buffalo, Waconia, or Belle Plaine. If you are looking in the south metro you would need to buy in Elko New Market, Northfield, or Cannon Falls. The eastern metro is not eligible in Minnesota, but just over the river in Hudson you could benefit from a USDA loan.
Low Down Payment Loans
Most buyers in the Twin Cities metro will find that FHA or Fannie Mae’s My Community loan are the lowest down payment options. While FHA is the most flexible program in terms of credit, it’s 3.5% down payment requirement is slightly higher than the My Community loan at a 3% down payment.
FHA is the most common because it can be used by most buyers. Even buyers who have owned homes in the past can use FHA financing. Additionally there are no maximum income qualifications for the program.
The Fannie Mae My Community loan or Freddie Mac Home Possible loans are designed for first time home buyers with moderate incomes. These can be excellent options for buyers who are looking to buy a property that does not necessarily qualify for the more stringent FHA standards.
Down Payment Assistance
Minnesota first time home buyers can also benefit from state and local community down payment assistance programs. These programs can help reduce the typical down payment requirement to as little as $1,000 down. These programs are generally limited by maximum income and asset guidelines. Most require that the buyer has not owned a home within the past 3 years but some actually are acceptable for buyers who are selling their current home to buy another.
Get Preapproved Early
If you are considering buying a home but are concerned about how much down payment you will need, I would highly suggest that you get preapproved early. You will want to work with a local Minnesota mortgage lender who has access to these down payment assistance programs so that you can truly learn what types of programs are available to you.
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