How To Buy A House With No Money Down
Buying
A home is a great investment in your future — but not one everyone can afford to make, especially when you factor in all the upfront costs involved. Before you write off the possibility entirely, though, did you know it’s in fact possible to buy a home without the funds for a down payment? Whether you’re on the fence about buying or simply trying to take stock of your options, we’re here to help.
Keep reading to learn about the different ways you can buy a house with no down payment today!
What Is A Zero-Down Mortgage Anyway?: As the name suggests, a zero-down mortgage is a home loan you can get without a down payment. A down payment is the first payment you make toward the home, and it’s due when you close on your home loan. Lenders usually calculate your down payment as a percentage of the purchase price on the home.
How Can I Obtain Such A Loan?: The only way to get a zero-down payment mortgage from major mortgage investors is through a government-backed loan, which is insured by the federal government. In other words, the government (along with your lender) helps foot the bill if you stop paying back your mortgage. The government offers guaranteed loans to people who need financial assistance when buying a home. This means that government-backed loans are less risky for the lender, and the lender can expand their usual loan offerings to people with riskier financial profiles, such as borrowers with no down payment.
What Are The Different Types Of Government-Sponsored Loans?: Two types of government-sponsored loans – VA loans and USDA loans – allow you to buy a home without a down payment. Each of the two loans has a very specific set of criteria you must meet to qualify for a zero-down mortgage.
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About The VA Loan: You may qualify for a VA loan if you’re an active-duty service member, military veteran, past or present member of the National Guard or Reserve, or the surviving spouse of a deceased veteran. Insured by the Department of Veterans Affairs, a VA loan can be an attractive option if you hope to avoid a down payment on a home purchase. Putting down less than 5% allows you to pay a one-time VA funding fee that’s 2.3% of your loan value and in lieu of mortgage insurance. For any subsequent uses of a VA loan, the funding fee is 3.6%.
About The USDA Loan: A USDA loan is a loan backed by the United States Department of Agriculture, offered to encourage development in rural and suburban areas. The best part? You can get a USDA loan with $0 down. USDA loans also have lower fees than other types of loans, although both you and your home must meet a few criteria to qualify for one. First, your home must be in a rural or suburban area. In addition, your home can’t be a working farm. It must be a single-family unit, and you must treat the home as your primary residence.
You also need to meet a few financial requirements to qualify. The combined gross income in your household can’t be more than 115% of the median income of the area your home is in. Your debt-to-income ratio shouldn’t be higher than 45%, and you should have a FICO® Score of at least 640 for the best chance of qualification.
What Are My Options If I Don’t Qualify For Either Type?: An alternative to low money down loans is down payment assistance (DPA). If putting money down on a house is a huge hurdle for you, but you can’t qualify for a government-backed loan, a DPA might be the right solution. The requirements for these grants or second liens may vary, so it’s well worth looking into your DPA options to see what you can qualify for.
Wondering what happens next? Get in touch with our team today here— we can help you devise a game plan to match your financial profile and goals!
