One of the most daunting obstacles facing Southland home buyers has been the hefty down payment. But that's changing. The traditional 20% down formula is giving way to plethora of private and government programs that ease the down payment shock.
Five percent, 3% and even nothing-down loans are becoming the alternative for many buyers as private industry and government team up to help more people into homeownership. As a result, with a little luck, some patience and one of the programs described below, it's now possible to get into a first home for $10,000 down.
And the $10,000 might be easier to raise than you thought. See the accompanying story on page K5 for some tips on how to do that.
Among the low-down programs are old-time favorites such as FHA and VA, as well as a raft of new programs, such as the city of Santa Ana mortgage for high school grads who earn a four-year college degree and return home to buy a house. And both the state of California and a big stock brokerage are offering separate programs that link a parents' assets to a nothing-down program for their children.
Other programs are targeted at veterans, public employees or buyers who are willing to purchase homes in distressed neighborhoods.
City of Los Angeles homeownership specialist Linda Buckspan points out that borrowers must fit the "narrow window" that each of these programs offers. "Not every program is for everyone, but together there is an opportunity for a lot of people," she said.
The lowest down payments often require excellent credit; and with all of the loans, borrowers must meet the qualifying criteria, which often includes employment history, income and credit history.
Prospective borrowers should also be patient. The low-down programs are often a complex combination of federal, state and local funding, which can complicate the underwriting process, require more scrutiny of borrowers' credit histories and slow the approval process. But hang in there, it can be done. Here are 25 ways to turn $10,000 into a house:
1--FHA: The Low-Down Leader
The U.S. Department of Housing and Urban Development offers a variety of mortgage insurance programs through the FHA, which requires about 3% to 4% cash down.
There are no income requirements to qualify for a FHA mortgage. Other advantages are that FHA loans do not contain prepayment penalties, and in some cases they are assumable by qualified purchasers.
FHA loan limits vary depending on the county where the property is located. Recently, the FHA loan limit was increased to $151,725 for single-family homes, but only in high-cost areas such as Los Angeles.
FHA does not lend money; it insures mortgages. FHA loans are made by a bank, savings and loan, mortgage company or other FHA-approved lender. In addition, FHA does not set the rates and points. The lender determines these, so it is best to shop around by calling several FHA-approved lenders.
Call the Los Angeles HUD office at (213) 251-7122 for more information.
More than 2.9 million California veterans and service personnel are eligible to participate in the Veterans Administration Home Loan Guarantee Program, which in most cases requires no down payment. VA loans can be used to buy a home, build a home, improve a home or to refinance an existing loan.
After issuing a certificate of eligibility to the vet, the VA guarantees the loan to the lender up to $184,000.
VA loans frequently offer lower interest rates than ordinarily available with other kinds of loans. To qualify for a loan, the first step is to complete a Certificate of Eligibility (Form 26-1880). Call (800) 827-1000 for more information.
3--More Help for California Vets
Veterans also can find financing through the state Cal-Vet home loan program, which offers low- or no-down payment mortgages, a low interest rate and no loan origination fees.
The maximum loan amount for single-family homes in Los Angeles County is $198,700; $220,400 in Orange County and $203,800 in most other Southland counties. For more information, contact Cal-Vet at (800) 952-5626.
4--No Down for Government Workers
The CalPERS Member Home Loan program is offered by the California Public Employees Retirement System (PERS), which invests pension funds for state and local government employees. PERS offers a standard 5% down program and a no-down option for members who currently work for the government and meet other qualifying criteria.
To get 100% financing, members must take out a personal loan for 5% of the purchase price or the appraised value, whatever is less. This is a personal loan, secured by the member's retirement contributions, and must be paid back. These funds are used to reduce the down payment to zero.
For more information, call Lomas Mortgage, which services the loans, and can be reached at (800) 874-PERS.
5--3% Down for First-Time (and Other) Home Buyers
The state-sanctioned California Housing Loan Insurance Fund is offering 97% loans, which are originated by private lenders.