Government Loan Programs: How Real Estate Investors Can Benefit
Title: Government Programs Help Real Estate Investors Overcome Down Payment Barriers
In 1934, the US government passed the Federal Housing Act with the goal of making homeownership more accessible to lower-income Americans. One of the key provisions of the act was the ability for first-time buyers to purchase a home with a down payment as low as 3.5%, significantly lower than the traditional 20% requirement for a mortgage.
Today, the program is still in place and remains a popular option for real estate investors looking to get started in the market. Under FHA rules, buyers must live in the property they purchase for at least a year, allowing for strategies like househacking, where part of the property is rented out to generate income.
However, with home prices reaching all-time highs in many areas, even a 3.5% down payment can be a significant barrier for some buyers. To address this issue, government programs at the state and local levels offer assistance with down payments. Fannie Mae’s DPA One tool helps buyers search for these programs across the US, which can include loans, grants, or tax credits with varying income and credit score requirements.
For example, in Los Angeles County, California, income limits determine eligibility for assistance, while in Michigan, buyers must meet income and credit score requirements and take a homebuying class to qualify for assistance.
Mortgage advisor Jeff Welgan highlighted the ease of buying a first house with little to no money down through these programs, with financing options ranging from 100% to 105% depending on the state. He also shared strategies for maximizing leverage, such as purchasing multi-unit properties with a low down payment or factoring accessory dwelling units (ADUs) into income calculations.
As housing supply remains tight, more properties are adding ADUs, providing additional income opportunities for buyers. Additionally, buyers can use Fannie Mae Homestyle Renovation Mortgages to purchase a property and construct additional units for rental income.
Overall, government loan programs offer valuable opportunities for real estate investors to overcome down payment barriers and enter the housing market with minimal upfront costs.
