The latest South Carolina home loan options allow homebuyers to purchase a home with little or NO down payment. Conventional mortgages have traditionally required a 5% -20% down payment, which is alright for more seasoned home buyers, but out of reach for the average first-time buyer. In this article, we will discuss other options that allow buyers to purchase a home with little or no down money down.
Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) and Veterans Administration (VA) loans are very popular choices and we will take a closer look at them below. While the average home buyer may have a basic understanding of these programs, he or she may not understand the difference. Each option carries its own specific set of requirements that may or may not suit the applicant’s needs.
The Federal Housing Administration (FHA) loan is sponsored by the U.S. Department of Housing and Urban Development. This is the most popular and widely used government loan program. The buyer only has to put 3.5 % down payment with the FHA making the program attractive to first-time buyers. The credit score and underwriting guidelines are less stringent than a conventional loan.
The buyer can put down as little as 3.5% down payment, which can be in the form of a gift. Monthly mortgage insurance (PMI) is required for FHA loans. The amount will differ based on the credit and down payment. However, for a standard buyer financing 96.5% the yearly premium is .85% of the loan amount broken up over a 12-month period. In addition, FHA loans require a 1.75% upfront funding fee that is normally rolled into the borrower’s loan.
All the government loan programs are available for only buyers who will occupy the property as a primary residence. Investment home and vacation homes are not permitted. Learn more about the FHA mortgage details here.
A USDA mortgage is backed by the United States Department of Agriculture (USDA Rural Housing) and offered through approved lenders and banks. These loans are specifically targeted to more rural areas in the U.S. However, many locations just outside of Charleston, Greenville, Columbia, Myrtle Beach, etc, are still considered USDA eligible. Buyers can check the South Carolina USDA eligibility map here.
The USDA 502 guaranteed program allows up to 100% of the appraised value of the home with no down payment required. Buyers can even roll in their closing costs with a higher appraised value, or have the home seller pay on their behalf.
USDA does not have loan amount limits as buyers qualify based on their debt to income. The property can be any move in condition home, it just has to be located in an approved zone according to the map above. Another advantage with USDA loans, the monthly mortgage insurance is less when compared to Conventional or FHA loans. Also, USDA does have household income limits, buyers can read all the USDA frequently asked questions here.
If you are past Veteran or current active duty, the VA loan is likely the best option available today. Low-interest rates, no monthly mortgage insurance, 100% financing just to name a few benefits. VA offers regular loans up to $484,350 for home buyers in SC. In addition, there is a special VA Jumbo loan available for buyers that require higher loan amounts. The VA Jumbo is available up to 1.5mil, but this program will require a small down payment. VA also offers many flexible streamline and 100% cash out refinance options.
Conventional mortgage among the most common type of mortgage. Loan providers require the buyer to put down 5-20% of the purchase price. The buyer needs to qualify within the lender’s debt-to-income ratio. The ratio for home expenditures (payment with taxes, insurance) should be no more than 30% of the buyer’s gross monthly earnings. The ratio for general debt is no more than 43% of the buyer’s gross monthly earnings. The buyer must present evidence they have money available for the down payment. Please do note the ratio limits above can be exceeded for strong buyers that have good credit, stable job history, cash reserves. Credit scores for conventional loan approvals should be above 620. The conventional loan amount cap in South Carolina is currently $484,350. Any amount over this will require a Jumbo loan, learn about all the Jumbo loan programs here.
Pro and Cons of Each Program:
A conventional mortgage is favorable for the borrower starts out with at least 20% down payment and can avoid private mortgage insurance (PMI) The downside is that saving enough for such large a down payment can take a long time of time for some buyers.
- FHA loans give buyers the flexibility to purchase a home with less money down, only 3.5%. There are also no income or location restrictions with FHA (like USDA)
- USDA offers 100% financing and these loans have the least rigid guidelines. However, but the property cannot be located in a populated city, and the buyers household income must below the 2019 USDA income limits. USDA & VA are also the only programs that allow 100% financing.
- VA is likely the best choice for any vet that has proper entitlement and eligibility. 100% financing, no restrictions on income or location. And the big advantage – no monthly mortgage insurance and low fix interest rates.
All the programs listed above are available for buyers nationwide. Please contact us to learn more about any of these programs by calling the number above (7 days a week) or just submit the Info Request Form on this page.