One of the biggest barriers to homeownership is the daunting belief that you need 20% down to even look at buying a house. In today's market, a "cheap" house in the metro is $250,000 and 20% would mean you need $50K before you even start.
No thanks.
So I attended a brown bag info session with Dawn at American Pacific Mortgage (important to note: they also have an office in Indian Country, based in Bemidji!). Dawn did a great presentation that focused on two $0 down government-backed options, and while I don't have her slides, I'll do my best to relay the highlights of each program.
VA LOAN
This one is limited to people who served in the military, as it's backed by the Department of Veterans Affairs. This is the loan I got, first through my Iraq War Veteran husband, then on my own after I served 6 years in the Reserves. It's important to note, this is not a benefit you get right out of basic training, like your education money. You have to complete some serious active duty time or your first contract of Guard/Reserve to be eligible.
From there, you need to contact the VA to get your Certificate of Eligibility (CoE). I had to go the hard way, but found out on our call that American Pacific will do the legwork of contacting the VA on your behalf with a release of information and your social - I can't recommend that enough, I wish I had that option years ago!
After you have the CoE, you take it to a lender that works with VA loans (or the lender got it for you and already has it. Again...awesome), and you go through the normal process to find out how much you qualify for based on your debt and income.
And not only do you not need money down for the house, but you also don't pay closing costs! The VA will pay up to 4% of various fees and costs at closing, better explained here. I didn't pay a dime when I bought my house, all the fees were rolled into the loan and nothing down was owed. The rate was competitive with conventional, the only downside to a VA Loan is the funding fee.
The funding fee is unavoidable, but it can be rolled into the cost with the other closing fees. It is a percentage of the sale, and your money goes to help other Vets get these loans, too. I've never been mad about paying it, especially in place of PMI (private mortgage insurance) on a 100% loan, but still, something to be aware of that it's legit.
Some lenders will try to tack on other fees and sell them to you as mandatory, but those are called scams. You are absolutely allowed to shop lenders, but I can vouch for Dawn and her team. She's a military spouse, she's used the VA Loan and so have I, so just find someone you trust and we'll get it done right!
USDA Loan
OK, so you're not a Vet and you're a little too past your prime to head to basic training. That's OK, the government has another $0 down option for you!
USDA Home Loans were invented to incentive single-family home ownership in rural America - this is the bread and butter for the reservation lands of MN!
Unlike the VA loan, this one is income based. You can't make more than 115% of the median income in your area, so it's better for local economy workers than for six-figure remote workers who want to occupy their lake cabin full-time.
It's also limited to rural areas. You can use this map to see if your potential home qualifies for USDA. North of St. Cloud, everything qualifies except for Duluth, Hibbing, and Fargo areas. That's all of the big six Chippewa land areas that you can get for ZERO down!
There's no credit requirement, but slightly stricter debt-to-income ratios, so pay off what you can before you apply here. The only other downside is that you'll be paying a (slightly smaller than average) PMI for the life of the loan. However, we're just doing this to get you IN the house. Once you've paid down 20%, you can always refinance to a conventional loan and get that PMI off your payment.
USDA is a great option for rural buyers, second only to VA if you qualify. And both share my goal of getting more Americans into stable, permanent housing, so I'm definitely here for it!
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