S2 Ep11 - Lowdown Loans - a podcast by Brian Cook And Kindra Cox

On Season 2, Episode 11 of The Brian and Kindra Show they discussed loan types with Melinda Russo of Bank7.  Melinda has over 12 years of experience in the loan industry and offers valuable insight to low down payment loans.  

Brian and Kindra have found that many buyers believe they need to have a large sum of money in their bank to buy a home, but there are quite a few options to purchase a home with a low down payment or even using a 100% loan. The USDA loan is a great choice for a first time home buyer if your location supports the loan type.  Also called a Rural Development loan, it is a 100% loan so 0% down payment!  Additionally, the buyer is able to have the seller pay up to 6% of the purchase price toward their closing costs.  The USDA loan is one that is restricted for specific income criteria and may not work for all buyers.  

Another low down payment loan is an FHA loan.  FHA loans are 3.5% down and the buyer is again allowed up to 6% of the purchase price in seller concessions. Some buyers have the misconception that the FHA loan is for first time home buyers only, but that is incorrect.  FHA loans are not based off of income thus being a more available loan product for the majority of people.  

Other low down payment loans are available.  The VA (Veterans Affairs) loans are 100% financing with the buyer able to use up to 6% of seller concessions just as with the USDA and FHA loans. There are also conventional loans that allow you to have as little as 3% down and the seller can provide 3% concessions. 

Because closing costs associated with a home loan can be quite costly, these loan types that allow the seller to pay some closing costs for the buyer are very beneficial to those who have limited funds to close.  Brian and Kindra commented that occasionally buyer will have the seller pay the maximum amount of their closing costs and be able to come to closing without any further funds!  However, even in that circumstance, there are still some upfront costs when purchasing a home and they want buyers to be aware of these (ie. earnest money and home inspection costs). 

A lot of buying a home is being educated about what you can and cannot do before you dive right in to the big stuff. A lot of people don't understand that cash is not a good sourceable fund for buying a home. A paper trail of funds is required for any funding. Tax returns and stimulus money are good sourceable funds when saving to buy a house. If you were to have a garage sale and earn $1,000 cash, those funds are not sourceable funds (they will have to sit for 60 days in an account to be sourceable). Money has to have a track record of where it came from. 

Brian and Kindra hope these tips have been helpful to you. As always, if you have any questions or need help, please feel free to reach out to your local real estate professional.

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