Mortgage Options for 5% Down Besideds an FHA Loan

This is a very difficult question to answer without knowing more about your location, the type of property you wish to purchase, and your personal income/asset/credit situation. Have you explored other options with your lender of choice? A good loan officer should be able to help you find all the options.

That said, there are several other mortgage products that allow for a limited down payment (if you meet their specifications):

Many states have a housing authority or association that may offer limited down payment loans. A partial list can be found here: http://www.ncsha.org/section.cfm/4/39/187 Additionally, both Fannie Mae and Freddie Mac have conforming and community based loan products (called “MyCommunity” and “HomePossible” respectively) for buyers with limited funds. Fannie Mae and Freddie Mac products are provided by your local banks and mortgage brokers – ask if you qualify for these programs. (They generally require strong credit and have income restrictions in certain areas)

More information can be found here: http://www.fanniemae.com/homebuyers/index.html 

and here: http://www.freddiemac.com/corporate/buyown/english/preparing/rightforyou/ Several “ not-for-profit” grass-roots community lenders have also emerged to assist motivated buyers in purchasing with minimal funds. These programs often require substantial involvement from you (such as volunteering your time, joining their community, serving, teaching, or counseling others throughout your mortgage term) and have additional restrictions regarding the use and sale of your home. An example of one of these organizations can be found here: https://www.naca.com/index_main.jsp Some local sellers or developers may offer rent-to-own programs in which a portion of your rent each month is saved in an account and credited back to you as down payment to purchase the home in a few years down the road – when done ethically, this is a fantastic deal for both buyer and seller, and allows you to begin enjoying the home now.

Finally, your local independent lenders, banks, or credit unions may have FHA-like programs designed to target just the local neighborhoods where you want to live. Be certain to check with lenders in your area to see if there are any additional “soft second”, “down payment grant”, or “community revitalization” programs that appeal to you.

If all else fails … put yourself on a strict budget, guard your credit, and make a 6-36 month plan for saving a larger down payment. You’ll get there!

Good Luck!