"I don’t have 20% to put down. Does that mean I’m out of the game?"
If you’ve even thought about purchasing a home, you’re already aware of the industry standard in home-buying: 20% down for a mortgage loan. The absence of that amount of cash is enough to defer the dream of home ownership for many. But this doesn’t have to be the case for everyone…
Why is 20% such a magic number in the first place? From the lender’s perspective, offering you more than 80% of the value of the home is a huge risk. Why? Well, statistically speaking, a buyer who hasn’t had the income or financial habits to save that amount of money is more likely to default on their mortgage loan. Nothing personal, these are just the facts.
But what if you have great financial habits? What if you’ve got a good credit score and you’re good at saving? Let’s say you’re thrifty, out there hustling every day, but not making the 6-figures it seems you have to make in order to buy a home. What then?
Freddie Mac’s HOME POSSIBLE program may just be the right fit, which allows a minimum of 3% down up to a loan amount of $636,150 in Honolulu County. So with 3% down, you’re looking at a max purchase price of $655,824. Whoa.
Yes, Freddie Mac developed what you can say is a hybrid loan between FHA and USDA loans to serve low to moderate income buyers. Unlike a USDA loan (in which you’re limited to buying in rural and underserved geographical areas) the HOME POSSIBLE program allows you to purchase island wide! You would just need to make sure you're within the income limitations. These limitations depend on which area you’re looking to live in, but note: there are even some geographical areas that don’t have any income limit. More info here: http://www.freddiemac.com/homepossible/eligibility.html
Some basic details:
- 3% down payment
- Down payment can come from a gift (e.g. from mom, dad, grandma)
- Buyer must be owner-occupant, purchasing as their primary residence
- Minimum FICO of 620
- Income limits may apply depending on location
- Home ownership education certification required for first-time home-buyers
- Max loan amount for Honolulu County can’t exceed $636,150
Do what you can with what you have, where you are. That’s what Theodore Roosevelt said. So you can’t buy a median-priced $750K home in Hawaii? Start somewhere. Start small, start now. Begin to build the dream. It’s your dream. And we’re here to be on your your team.
Thanks to our info source for this article: Steven Bui, loan originator at Compass Home Loans, LLC. He’s a responsive, informative and creative problem solver. Great guy to have on your team.