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by FHA-approved lenders through the Department of Housing and Urban Development (www.hud.gov/offices /hsg/fhahistory.cfm). FHA also offers down payment assistance programs.
VA Loans. Depending on the region, the Veterans Administration offers 100% financing. Loans for eligible veterans are granted by the VA Loan Guaranty Service. “You still have to take care of closing costs, but if the seller also spots part of that, you’re still delivering less out of pocket,” says Dunagan.
80/20 Loans. This option allows the borrower to take out a first mortgage on 80% of the purchase price of the home and a second mortgage on the remaining 20%. Doing this avoids PMI, which must be paid to guard against default any time a mortgage loan exceeds 80% of the appraised value of the home. “You don’t want to pay for something that you can’t write off,” says Dunagan, “which is why you do two loans.” These loans can be used for 100% financing when borrowers don’t have enough for a significant down payment. But be aware that the interest rate will vary depending on your credit rating.
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