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Money Talk: You don’t need a bunch of money to achieve the ‘American Dream’

William Mandrell | 6/16/2017, 6 a.m.

There are many would-be homeowners out there that have been misled about their ability to afford a home in Boston. We have some of the highest real estate prices in the country and the misconception that you can’t purchase a home without 20 percent down has led a lot of people away. Here are five mortgage programs that require significantly less out of pocket money.

Mass Housing Home Mortgage

Mass housing loans is a state-funded program to help homebuyers within Massachusetts. Mass housing allows buyers to purchase a home with a minimum of 3 percent out of pocket. The big benefit of mass housing is that you do not pay PMI on these loans. The downside to mass housing, is that there are income qualifications and you do have to take a first-time home buyers course to be eligible for the loan.

FHA Mortgage Loans

FHA (Federal housing administration) home loan programs are probably the most popular throughout the country for individuals who are not capable of placing a 20 percent down payment. The FHA loan program allows for a 3.5 percent down payment and a minimum credit score 580. If you’re purchasing a home for $400,000 the down payment or an FHA loan would be roughly $14,000, opposed to $60,000 if 20 percent was required. You do however pay a little more for the ability to put less down. An FHA loan requires you to pay PMI (or private mortgage insurance). This is insurance the government makes you pay for not having a loan to value of 80/20. Once your home appreciates, or your debt is paid down to a point we are mortgage is 80 percent or less of your home’s value, you can refinance out of the FHA loan and remove the PMI requirement. Another positive of the FHA program, is that it allows family members to help you contribute to your down payment.

203K HomeLoans

A 203k loan is similar to an FHA loan with an added bonus. The 203K loan allows you to borrow additional funds to make repairs to the property you purchase. For example, you can purchase a home for 300,000, and borrow an additional 30,000 for a kitchen and bathroom makeover.

5 percent Down Conventional Mortgage

There are also conventional mortgage programs that allow for a 5 to 10 percent down payment. There are no homebuyers courses, income restrictions or PMI to pay, that you may receive a slightly higher interest rate.

VA (Veterans Administration) Home Loans

VA helps Service members, Veterans, and eligible surviving spouses become homeowners. VA does not require a down payment to purchase a home. If your income qualifies you can finance 100% of the cost of your home.