Let’s help get more people into homes.

These days, real estate agents frequently come across prospective clients who are hesitant to start the homebuying process because they don’t think they can afford a home or qualify for a mortgage. However, many people are simply unaware of the options available that can provide a path to homeownership. That’s why it is important to educate buyers, and have them discuss financing options with an experienced mortgage loan officer (MLO).

After hitting record lows in October 2023, the National Association of Realtors’ Housing Affordability Index has shown modest improvement in 2024, with an index level that has climbed back above 100.¹ However, affordable mortgage solutions often require looking beyond conventional mortgage options. U.S. Bank MLOs can assist buyers who may need a mortgage with a low or no down payment or a lower interest rate than what a conventional fixed-rate or adjustable-rate mortgage provides.

Mortgage assistance programs

Down payment assistance programs have become a widely used solution to bridge the financing gap. According to the Down Payment Resource Q4 2023 report, there were more than 2,200 active homebuyer assistance programs in the U.S. as of the fourth quarter of 2023.²

Down payment assistance can include loans, grants, tax credits and other programs designed to help eligible homebuyers cover down payment and also closing costs.

U.S. Bank’s American Dream program offers assistance funds that can be used for a down payment, closing costs, required repairs or minor improvements. The program, which is available in 26 states, can help consumers with limited resources become homeowners, especially low-to-moderate income (LMI) borrowers and those purchasing in LMI neighborhoods.

U.S. Bank partners with numerous Housing Finance Agencies (HFAs), government municipalities and nonprofit partners across the U.S. to make down payment programs available for potential homebuyers. The requirements for each program vary but are typically based on income, the price of the home and a buyer’s history as a homeowner. Some of the common assistance programs include:

• Grants, which are not required to be repaid
• Loans that may be deferred and due upon the sale, refinance or payoff of a first mortgage
• Second mortgages with 0% interest
• Loans that may be forgiven, typically a second mortgage with 0% interest that’s forgiven over a specific number of years as long as the borrower remains in the home for that amount of time
• Mortgage Credit Certificates (MCCs), an annual federal income tax credit that helps offset interest expenses

Although not a formal program, another common form of assistance for many first-time buyers is gifts from family members and friends. In addition, while many down payment assistance programs are aimed at first-time homebuyers, a buyer may be eligible for some programs if they haven’t owned a home in the past three years.

Zero or low down payment loans

Buyers who have little cash or savings can find options available through low or even zero down payment loans, which allow a buyer to finance 100% of their purchase price.

• FHA loans: Federal Housing Administration (FHA) loans are government-backed loans that offer consistent rates, low down payment requirements and flexible qualification guidelines. They also tend to have lower credit and down payment requirements for qualified homebuyers.
• VA loans: Backed by the Department of Veteran’s Affairs, these loans feature low or no down payment options, no mortgage insurance requirement and flexible qualification guidelines. To be eligible for a VA loan, you must be an active-duty service member, a veteran or an eligible surviving spouse.

Qualifying low-income buyers

Loans such as Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs are aimed at making homeownership more attainable for low-income buyers.

Key features of Fannie Mae’s HomeReady program include:

• A down payment as low as 3%
• A new benefit of a $2,500 credit for very low-income borrowers to assist with down payment and closing costs
• A new enhanced “Best Efforts” commitment allows lenders to lock in margins and reduce hedging costs, creating price benefits that can be passed on to borrowers³

Key features of the Freddie Mac Home Possible mortgage include:

• As little as a 3% down payment
• Co-borrowers who do not live in the home can be included for a borrower’s one-unit residence
• Borrowers are permitted to have another financed property

Know about mortgage options

Real estate agents and builders are facing a tougher job of getting clients who are eager to buy a new home into a position where they feel confident in their ability to purchase. But while affordability can be a big hurdle for many prospective homebuyers, those hurdles aren’t insurmountable – especially if the buyers can take advantage of mortgage products that aim to make buying a home more affordable.