Most mortgage loans in Utah will require you to make a down payment of 20 percent to qualify. The purpose of the down payment is to show your commitment as well as protect the lender if you default. The median house price in Utah is $341, 600, meaning that 20 percent is still a considerable amount. However, if you cannot raise the 20 percent, you need not worry. You can instead explore mortgage loan options with no down payment.
USDA rural development housing loans
The US Department of Agriculture gives these loans to rural home buyers. USDA housing loans target low-income earners. Besides coming from an eligible rural area, you must meet income bracket and credit score requirements to qualify for the loan. The minimum credit score for USDA loans changes from time to time; however, it usually ranges between 600 and 640. Furthermore, USDA loans are given to buyers who are planning to use the property they are buying as primary residences.
You may be required to pay an upfront loan guarantee fee of about 3.5 percent; you have the option of rolling the upfront fees into the mortgage. The repayment terms will depend on your income level.
Navy federal loans
The Navy Federal Credit Union is one of the largest credit unions in the country in terms of assets. The union offers no down payment mortgage loans to military personnel and Department of Defense employees. Spouses and children of military personnel also qualify for the loans.
Navy federal mortgage loans are for primary home buyers; you cannot use them to buy commercial property. Borrowers incur funding fees of about 1.75 percent of the loan amount.
Veteran Affairs (VA) loans
These loans are for veterans and military families. This is an insurance program of sorts, but it also guarantees mortgage loans for eligible borrowers up to a particular limit. The loan limit varies from state to state. In Utah, the limit is $484,350. Lenders might ask for a down payment if the loan amount is above the threshold.
VA loans require funding fees of between 1.25 and 3.3 percent of the loan amount; the funding fees can be rolled into the mortgage. VA loans are offered by different lenders. To qualify, you must present a certificate of eligibility. The loan qualification requirements might vary from lender to lender; generally, lenders will require you to have a debt to income ratio of at least 40 percent.
What is the catch?
As you might have noticed, most no down payment mortgage loans are offered or guaranteed by federal bodies or welfare organizations. Conventional lenders also offer no down payment mortgage loans, especially for short repayment periods. The absence of a down payment means the borrower has no equity; such borrowers are regarded as high-risk borrowers. Due to the increased risk, the lender may charge high interest for the loan or require the borrower to take private mortgage insurance; this increases the cost of borrowing. Insurance fees alone inflate the cost of borrowing by between 0.5 and 1 percent.
