ASK THE LOAN MAN: Buying a House with No Money Down

Can I still buy a house with no money down?

I was kind of stuck on what to write for this month’s article and so I started to look back at what I had written over the years and I saw headlines like these:

Is now a good time to buy a house? – January 2008
Risky Income Documentation? – August 2007
We have hit rock bottom and we are clawing our way back up! – March 2008
Time Travel for better interest rates. – May 2008
Can I still buy a house with no money down? – February 2008

I realized that I could take any one of these topics and write about it today. Yes, I know I said that we had hit bottom in March 2008 and there is a chance I was wrong…… the funny thing is I believed it then and I think I believe it now. What can I say, I’m a positive guy.

A lot has changed in a few short years, I was writing about risky income documentation in August 2007. Stated Income, NO DOC loans and the like were available then and a few short months later they were gone. So what I decided to do was steal my own headline from a year ago and write the article today with the rules and programs of February 2009… so here goes.
Last year I wrote that there were 5 different loan programs that will allow you to get into a home with no money down. Several of those programs are now gone along with DPA’s or Down Payment Assistance Programs but we do have 2 true no money down programs available today and we have a couple low down payment programs available as well.

We have USDA home loans and VA home loans available with no money down. Both of these are government programs and both are available to a very specific group of people. The VA is for veterans or a veteran and their spouse. The USDA loan is available to people who make less than 115% of the median income for their area and want to live in smaller cities and towns (all of west county is OK, Windsor, Sonoma, Agua Caliente fit also). The other commonality of these loans is that they require funding fees but no monthly mortgage insurance (that’s good!).

We have a very special loan just for teachers that is backed by their retirement system. I am talking about a Cal STRS loan with just 3% down payment. Teachers, you will need to have 1% of your own funds and 2% can be a gift from a family member. This loan is unique in that you get a regular 80% 1st mortgage and then we get you a 17% 2nd mortgage from Cal STRS and there are no payments due on that 2nd mortgage for 5 years. I would love to help some teachers with this loan, I want teachers to be a part of the community and own a home here and I do believe now is the time to make that happen.

Lastly we have good old FHA loans which was a huge part of my business in 2008. FHA requires a 3.5% down payment and it can all be a gift from an appropriate source. With this loan, there are no income or geographic restrictions and you don’t have to be a teacher or a first time buyer. FHA is a little more lenient on credit scores and job histories as well. This has proven to be a wonderful tool for many people and it is a good market for FHA loans.

So….. yes Virginia! There are no and low down home loans available today.

I welcome questions about home loans and the real estate market in general. Please let me know what you want to hear about in future articles.

Hans Bruhner, CMPS is licensed in CA & HI. If you have a question, please contact Hans at (707) 887-1275 or hans@hansblog.com or stop by www.AskTheLoanMan.com. First Priority Financial, Inc. is licensed by the CA DRE #00654852.