Mortgage Lenders Relax the Rules

If you have good credit and a stable job, you've got options.

In the wake of the mortgage meltdown, home buyers with a down payment of less than 20% were limited to borrowing from the Federal Housing Administration (FHA), which offers mortgages with as little as 3.5% down. You have more options now. Lenders are still tough on borrowers, but if you have good credit and a stable job, you may qualify for a low- or even a no-down-payment mortgage.

Lenders will make loans (and private mortgage insurance companies will insure) with 5% to 10% down, provided you meet all other, still-conservative loan criteria, such as requirements for credit score, debt-to-income ratio and supporting documentation. You must pay for private mortgage insurance (PMI), but it may prove cheaper than FHA's insurance.

A few lenders even offer 100% loans. The Navy Federal Credit Union’s HomeBuyers Choice program offers zero-down mortgages (up to $1 million) with no PMI to its members in all branches of the military throughout the U.S. NASA Federal Credit Union offers a similar program (up to $650,000 with no PMI) only to members in Maryland, Virginia and Washington, D.C., but it may expand the program.

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Patricia Mertz Esswein
Contributing Writer, Kiplinger's Personal Finance
Esswein joined Kiplinger in May 1984 as director of special publications and managing editor of Kiplinger Books. In 2004, she began covering real estate for Kiplinger's Personal Finance, writing about the housing market, buying and selling a home, getting a mortgage, and home improvement. Prior to joining Kiplinger, Esswein wrote and edited for Empire Sports, a monthly magazine covering sports and recreation in upstate New York. She holds a BA degree from Gustavus Adolphus College, in St. Peter, Minn., and an MA in magazine journalism from the S.I. Newhouse School at Syracuse University.