Becoming a homeowner is a dream for many, but dealing with the required down payment can be a significant challenge. This is especially true for those who have limited savings. Fortunately, several options can help individuals achieve their dream of owning a home without a large down payment. We discuss a range of options designed to provide pathways to homeownership with minimal down payment requirements.
Option 1: Conventional 97
What it is: Helps homebuyers secure a loan with a down payment as low as 3%. A private mortgage insurance (PMI) is required but can be canceled once the loan-to-value ratio reaches 80%. This means there is 20% equity in the home.
Who it’s for: First-time homeowners with strong credit histories who may not quality for other low-down-payment programs.
Option 2: Home Possible
What it is: Helps borrowers qualify for a mortgage with a down payment as low as 3%. This program for low to moderate-income homebuyers offers flexible credit requirements and allows for down payment assistance from a variety of sources, including gifts and grants. The qualifying income is limited to 80% of the Area Median Income (AMI).
Who it’s for: Borrowers with limited savings.
Option 3: FHA Loan
What it is: The Federal Housing Administration (FHA) loan program is known for its low-down-payment requirement of just 3.5%. FHA loans offer competitive interest rates and allow for higher debt-to-income ratios.
Who it’s for: Typically popular among first-time homebuyers and those with lower credit scores due to lenient eligibility criteria.
Option 4: VA Loan
What it is: Offers the opportunity to purchase a home with no down payment requirement. VA loans are guaranteed by the Department of Veterans Affairs and offer competitive interest rates and flexible qualification standards.
Who it’s for: This program is a valuable resource for those who have served our country and are looking to achieve homeownership, including eligible veterans and active-duty service members and their spouses.
Option 5: USDA Loan
What it is: The U.S. Department of Agriculture (USDA) loan program is driven by property eligibility and income limits and specifically designed to assist individuals with purchasing homes in rural areas. It provides competitive interest rates and flexible credit requirements that offer 100% financing for eligible borrowers (no down payment is required). USDA loans make homeownership achievable for rural residents who may not qualify for conventional financing.
Who it’s for: Specifically designed to assist individuals with purchasing homes in rural areas.
Option 6: Welcome Home Grant*
What it is: Offered by the Federal Home Loan Bank and provides down payment assistance. Eligible recipients may receive up to $20,000 in grant funds to be used toward their down payment and closing costs. This program is available on a limited basis as funds are made available by the Federal Home Loan Bank (FHLB).
Who it’s for: Qualifying homebuyers residing in participating states, including Ohio, Indiana, and Pennsylvania.
Option 7: OHFA*
What it is: The Ohio Housing Finance Agency (OHFA) offers a range of programs and resources to assist homebuyers in Ohio, including down payment assistance, affordable mortgage options, and home-buying education.
Who it’s for: Low-to-moderate-income individuals and families throughout the state.
Option 8: Communities First*
What it is: Communities First is a grant offered in increments of 3%, 4%, or 5% assistance when available. Union Savings Bank offers 3% assistance. This loan offers instant equity in a home without repayment or retention and is offered by the Port of Greater Cincinnati Development Authority.
Who it’s for: First-time and repeat homebuyers in targeted areas of Ohio.
Option 9: ADDI*
What it is: A federal program administered by local governments and housing agencies for low to moderate-income homebuyers. The American Dream Downpayment Initiative (ADDI) grants can be used toward a down payment and closing costs, making it easier for qualifying individuals to purchase a home.
Who it’s for: Low-income, first-time homebuyers wanting to purchase a single-family home, condo, or manufactured housing.
Option 10: NHS*
What it is: Neighborhood Housing Services (NHS) is a nonprofit organization that offers programs and services to promote affordable homeownership through down payment assistance, homebuyer education, and counseling services.
Who it’s for: Families navigating the home-buying process and achieving their homeownership goals.
Thanks to these low-down-payment options, achieving the dream of homeownership is within reach for many individuals. As you consider one of the many down-payment-assistance programs available, it’s essential to explore your options and find the solution that best fits your needs and financial situation. With the help of these programs and resources, you may overcome the challenge of a large down payment and start your journey to homeownership with confidence and security.
*Program is offered and administered by a third-party institution.
All home-lending products are subject to credit and property approval. Rates and program terms and conditions are subject to change without notice. Other restrictions and limitations apply.
These articles are for educational purposes only and provide general mortgage information. Products, services, processes, and lending criteria described in these articles may differ from those available through Union Savings Bank. For more information on available products and services and to discuss your options, please contact a Union Savings Bank loan officer.
