If you’ve been hesitant to buy a home because you don’t have enough money for a down payment, it’s worth considering a new option, the 100% FHA mortgage. The FHA now offers a 100% financing option that could make homeownership possible.

What Is It?
Traditionally, FHA loans require a 3.5% down payment. With this new program, you can cover that 3.5% through a second mortgage, turning the FHA loan into a zero-down payment solution.  Seller’s can pay your closing costs if negotiated during the sale.  This is a chance to move in without any money for a down payment.

How Does It Work?
Here’s the breakdown:

• The first mortgage is your standard FHA loan for 96.5% of the home’s value.
• The remaining 3.5% comes from a second mortgage.
• The second mortgage can be structured as a fixed-rate loan, often with repayment terms ranging from 10 to 15 years.
• You’ll have two separate payments: one for the primary mortgage and one for the second mortgage.

Who’s It For? This program isn’t for everyone, but it’s a fantastic fit for:

1. First-Time Homebuyers: If you’re struggling to save for a down payment but can handle monthly mortgage payments, this could be your chance to own a home.
2. Buyers with Steady Income but Low Savings: Maybe you’ve got stuff that’s come up that makes savings difficult. Maybe the idea of saving $7,000 to buy a $200,000 house seems out of reach.  But, if your monthly budget can afford the payments, you might be ready to buy.
3. Renters Ready to Break Free: If your rent keeps climbing and you’re ready to lock in housing costs, this option helps you make the leap without waiting years to save a hefty down payment.

Why It Makes Sense

• Keep Cash in Your Pocket: No need to drain your savings for a down payment.
• Build Equity Sooner: Stop paying your landlord and start building your own net worth.
• FHA Flexibility: FHA loans are known for being more forgiving on credit scores and debt-to-income ratios, making homeownership possible for more people.

What to Watch Out For Of course, there are trade-offs:

• Two Payments: Remember, you’ll have two mortgage payments to budget for.
• Interest Rates on the Second Mortgage: Typically, the rate is 1-1.5 points higher than the first lien—but that affects ONLY the 3.5% portion, meaning the rate difference will be a small monthly payment difference.
• Loan Terms: Understand the repayment schedule and terms for that second mortgage.

Bottom Line If you’ve got stable income but don’t have a pile of cash sitting around for a down payment, this FHA 100% financing option could be your way into homeownership. Want to know if it’s right for you? Give me a call at 832-557-1095 and we can see if this makes sense for you.