In the News: Feds Target No-Money-Down Home Loan Programs
Although no specific changes have gone into effect, the U.S. Department of Housing and Urban Development is asking national groups to hold off on lending down payments to FHA home buyers. The reason? Feds say that buyers who don’t supply their down payment are at higher risk of defaulting on their loans.
One of the most extensive national programs to provide down payment assistance is the Chenoa Fund, which assists in more than 70,000 FHA home loans across the country every year. The Native American financial group responded with a lawsuit against HUD.
Borrowers under this program typically have trouble buying a home without assistance due to poor credit. Borrowers using the Chenoa Fund assistance program do not have to be Native American to qualify and the repayment interest rate is often about half a percentage point higher than the market rate.
HUD decided to delay any changes until July 23 because of the lawsuit.
What about Government issued zero down payment home loans?
There are no changes to government-issued down-payment assistance programs.
Although many would-be homeowners can afford a monthly mortgage payment, coming up with a large lump sum for a down payment can prove to be a challenge. Down payment assistance plays a vital role for these borrowers, so any reduction to assistance programs could put some buyers out of the market.
About 30% of homebuyers today use some sort of down-payment assistance program, even for the 3.5% down payment home loans.
Those potential homebuyers who have trouble coming up with 3.5% down will often turn to government or national assistance programs, such as The Chenoa Fund, for help.
The states that will be hit the hardest due to the loss of assistance include Alaska, Virginia, Mississippi, West Virginia, and Wyoming. About 40% of homebuyers in these states use down payment assistance.
Remember: Government assistance programs are still available! Ask about our VA and USDA home loans!
So what, then, are your options for buying a home with little to no money down? How much can you afford?
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