Real Estate
June 20, 2018
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Loan programs with little or no down payment

By: Scott Sheldon
May 25, 2018

Looking to buy a primary home or maybe a move up home, but don’t have any cash? Following are some programs that could be available to you to help you purchase a house…

VA financing… if you are a military veteran you can purchase a house with no money down using a VA loan. The program offers some lucrative options along with attractive rates. The program does not require any monthly mortgage insurance and with the seller credit for closing costs you can get your foot in the door. The other beauty of the VA financing is that while it does not require a down payment it can be used on sizable loans all the way up to a million dollars and beyond as there is no loan amount limitation.

USDA financing— USDA financing allows you to purchase a house in USDA specific rural agricultural areas. Areas that are eligible are all West County, Lake County, Sonoma, Kenwood and virtually the entire area of the coast. These areas are considered less industrialized by the US Department of Agriculture and will allow you to purchase a house without needing a down payment. Get money for closing costs in the form of a seller credit and you’re in.

Calhafa and Dap– both programs work similarly to the program’s above with no down payment or putting in very little for a down payment in combination with getting a seller credit for closing costs. CalHafa allows you to purchase a house with a second mortgage to offset the down payment. The California down payment assistance program allows you to purchase a house with a grant from the State of California however the interest rate associated with such financing is about .5 percent above current market rates.

An alternative is 3.5 percent down payment…

Traditional FHA 203b. This program requires a 3.5 percent down payment and limitless on location and is incredibly flexible on down payment. There is consensus the program is a viable choice to purchasing a house amongst the real estate community as well. This program also offers attractive interest rates and allows for a gifted down payment and seller credits for closing costs.

Is it possible to purchase a house in Sonoma County with no money down? Yes, it is possible, but it may not be probable. Here’s why… As a home buyer there’s two hurdles to overcome. The first is getting qualified for the type of financing that you’re looking for with no money down. Some of the programs have income limitations which means if you earn too much money you don’t qualify for the program. Secondly, there’s getting into contract. Getting into contract might prove to be very challenging especially for the type of property that you might want and or the area in which you desire to live if the program for example dictates where your choices are in USDA.

Most listing agents will advise their seller to pick the strongest and best offer. If you’re going up against other offers and those other offers are either all cash or have down payment funds it could be particularly challenging to get into contract, not impossible, but very challenging.

If your situation can support it, pulling money for a down payment in the form of a 401k, a gift from family or working with a down payment if possible may greatly increase your odds of getting into contract while giving you a substantially lower monthly mortgage payment with a more attractive interest rate included. The caveat to that advice is a VA loan as the VA has extremely attractive interest rates and does not require a down payment and by far has the most amount of borrowing power. Looking to get or buy a home? Get a no cost quote now. Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.