Buying a home with no money down allows a home buyer with little to or no deposit by using zero down home loans that requires no down payment. These 100% financing home loans are much rarer today than a decade ago. But there are several no down payment loans you may be able to qualify for in some cases. Plus, there are many low down payment zero down home loan options for first time house buyers too. Let’s explore the 2017 real estate financing marketplace while breaking down exactly how to buy a house with no down-payment without breaking the bank.
Now is an excellent time to buy with zero down home loans. Some new home buyers are securing 100% mortgage financing and many are finding loan opportunities with a limited amount down required. Sales of existing homes are rising in 2017, supply is low in many markets, and houses are appreciating in value. Plus, according to a Zillow report, mortgage rates on the zero down home loans are still low in the 4% range, but are rising. You will probably pay more for a loan next year, so now is the time.
However, many people are stopped from buying a home because they are afraid of having to put a lot of money down on a home. But there are ways to buy a home without putting down 20%.
How to Get a No Money Down Loan to Purchase a House
Even though the mortgage crash made it harder to buy a home with less down, you definitely do not need to put down 20%. For some reason, many Americans still think you have to put 20% down. This has not been true for decades. This myth may be perpetuated by the fact that you do generally need 20% equity to not have to pay private mortgage insurance premiums.
Some people hate the idea of paying PMI, but we don’t think they should. Paying PMI costs the typical buyer $100 to $200 per month. But the up side is that it allows you to put down much less than 20%.
We think that it is a bad idea to tie up most of your savings into your home. We like the idea of putting down much less than 20% down and paying PMI if it’s necessary.
There are some 100% mortgage financing programs available still that you might consider depending upon your personal circumstances. When shopping online, verify the lenders you are considering offer affordable home loans with zero down without charging exorbitant closing costs and fees.
No Down Payment Loans Guaranteed by the VA
If you are a military veteran or active duty military, you can get a no money down mortgage with a VA loan. Surviving spouses also can qualify. These zero down house loans are guaranteed by the US Department of Veteran Affairs, and the VA will pay back the lender if you do not pay the loan.
Because of your military service, you can get a 100% home loan with zero down and even get closing cost help. You also could get a very low interest rate. VA financing has offered the most competitive zero down mortgage rates for many years. If you meet the VA eligibility, these no money down home loans appear very attractive.
If you are buying in a more expensive region of the country, you can get a zero down home loan up to $636,000. This higher loan amount can be essential if you are buying in CA or HI.
Zero Down Home Loans from the USDA
If you are not a military veteran, you still do have another zero down home loan option. The US Department of Agriculture offers a 100% financing mortgage. It used to be called a Section 502 mortgage, but also is called a Rural Housing Loan.
The good news about these loans is that you do not always have to buy in a rural area. You also can sometimes get a USDA mortgage in many suburban neighborhoods. The goal of this program is to allow low and moderate income home-buyers to buy a home.
Many people who get a USDA Single Family Guaranteed Loan often have a good income and live in a traditional residential neighborhood outside of major cities.
For instance, some suburbs of Columbus OH meet eligibility standards to get a USDA loan.
Some of the major benefits of these zero down home loans are that you can often include home repairs in the loan, and you can also buy more expensive homes with the program.
The interest rates for the USDA loans with zero down-payment are also quite low.
If you have the ability to put down a small amount of money for your home, you will have many attractive options available.
FHA 3.5% Down Loans
Your very best option to put a limited amount of money down is an FHA home loan. These loans that are guaranteed by the Federal Housing Administration require only 3.5% down if you have a credit score of 620 or higher. The standard financing product is not a zero down home loan, but it’s pretty close to it. The minimum credit score on FHA mortgages starts at 500, so there are many chances for people with less than great credit to buy a home in the U.S.
FHA underwriters are very flexible as far as credit scores and down payments. FHA will usually insure the home loan if you have a 620 FICO score if you have sufficient income to pay the loan. They also will allow you to buy a home if you have a foreclosure or bankruptcy at least a year ago.
The FHA program could be considered no money down in a way; if you can get a gift from your family, you may not have to put down any money at all. FHA allows financial gifts to be used for the 3.5% down payment.
FHA will insure these loans up to $636,000 in more expensive areas. So you can buy a home with an FHA mortgage with only 3.5% down in more expensive areas.
In some states, people are getting approved for home buying grants with FHA financing so it turns into a zero down mortgage in many instances.
There are fewer zero down home loans today than a decade ago. The mortgage crash required many lenders to increase their lending standards. This meant requiring some down payments for home loans. But if you can qualify for a VA or USDA loan, or can get gift funds for an FHA mortgage, you still may be able to get a zero down house loan today.
Top Ranked Home Loans with No Down Payment Required
Many potential home buyers think that 100% financing home loans are no more. After the mortgage crash, it is true that 100% financing loans became harder to come by, but they are still out there.
In this article, we will describe your zero down payment mortgage loan options. If you can buy a home with little to no money down, you will be able to save your money for fixing the home up or for other needs. As a new house buyer it makes sense to preserve your capital if you can get an affordable home loan with no down-payment.
Why Are There Still 100% Financing Loans?
Many home buyers wonder why most home loans today require to put money down? It all boils down to the fact that the lender wants to make sure that it is paid back.
Research shows that the more money put down on a home, the less chance that a buyer will default. In fact, experts say that the amount put down on a home is even more critical in determining lender risk than one’s credit score.
This is why many years ago the standard down payment became 20%. Anything that is below that is considered a higher risk mortgage and requires mortgage insurance, such as PMI. This insurance ensures that the lender will get reimbursed if the borrower does not pay.
However, there are still some zero down payment loans available.
No Down-Payment Required with USDA Loans
The USDA home loan has been available for a long time. It is gaining in popularity though because it is zero down and the credit requirements are fairly lax.
Does this sound too good to be true? We assure you, it’s true! This program has been used to fund zero down mortgages a million times since 1949. This program is provided by the USDA as a way to help increase rural development by encouraging people to own homes. Studies show that home ownership increases the value and stability of neighborhoods, by and large.
To qualify, you can have poor credit, but you need to have enough income to support your home payment and other bills. You also cannot have too high of an income; this is a program for people with lower incomes.
The key factor in this program is buying a home that the USDA considers ‘rural.’ However, even though rural areas are targeted, some suburban areas are still considered rural according to the USDA. Many large US cities are not far from many houses that can qualify for a zero down USDA loan.
The USDA loan can be even cheaper than zero down too; the seller can pay part of the closing costs. So you do not need to come up with a down payment or most closing costs, in some deals. With many USDA loans, it is cheaper to buy a home than it is to pay rent.
You do need to pay a 2% up-front fee that you can finance with the loan; it does not have to come from your savings account directly.
The USDA loan is an excellent 100% financing home loan program that people buying in rural areas should strongly consider.
Zero Down VA Home Loans
Another excellent zero down option is the VA home loan. This loan is an option to people who have at least two years of military experience. Those who are active duty and have at least 90 days of service also qualify.
The VA estimates that more than 20 million people in the United States may be eligible for a VA loan, but they may not know they are eligible.
Anyone who can get a VA financing should! VA guarantees no money down home loans that have very low interest rates and are usually lower than conventional mortgages. You also do not need to pay a monthly mortgage insurance fee such as FHA and USDA loans.
This is truly one of the most affordable no money down home loans out there, and you can put zero down….and the seller can pay part of your closing costs.
Lenders will usually allow a lower credit score on a no money down home loan backed by the VA; a typical credit score can be as low as 620.
‘Zero Down’ FHA Loans
Most people think that FHA loans, while a good program, require at least 3.5% down. This is true in most cases, but sometimes it can be a zero down mortgage.
FHA guidelines state that you can receive the entire down payment as a gift, if you have a friend or relative who wants to assist you. So, you do not need any of your own cash to put down on your home, if you have a gift.
So technically, this is not a 100% financing loan, but the effect can be the same in some cases.
A lot of people actually receive gifts to buy a home, especially first time home buyers. Many parents want to help their children buy their first home, so they help them with the down payment.
Another great FHA niche product is the Good Neighbor Next Door Loan. Police officers, teachers, and other public workers may buy a home with only $100 down.
That’s not 100% home financing, but its close!
The Bottom Line on $0 Down Home Loans
There are fewer zero down loan options today than in the past, but the three options above give you a chance to put very little money down when you get your home, including limited closing costs. Take a close look at each loan to see if you can qualify.
Top 3 No Money Down Mortgage Loans in 2017
People who want to buy their own home frequently inquire about a no money down mortgage loan. Having to put up to 20% down makes it very difficult for millions of people to ever buy. Putting no money or very little money down to buy a home certainly makes buying your first home easier. But is it still possible in 2017?
Yes, there are a limited number of no money down mortgages available. Many people think that all 100% financing loans went away after the market downturn of 2007 and 2008. It is true that there are fewer of these programs available today, but some remain. Please continue reading to learn more details.
100% Financing Basics
Lots of potential home buyers lament the fact that down payments are often required to buy a home. Why can’t the lender just fund 100% of the purchase price? The reason is that lenders are in the business to make money, and generally speaking, home owners who do not put money into the deal are more likely to default on the loan.
Usually, the higher the down payment, the less risk that the borrower will default. Some lenders even put more emphasis on the size of the down payment than the borrower’s credit score.
Still, there are some 100% mortgage financing programs available, or nearly 100% financing, from government agencies in the US:
#1 Rural Home Loans Backed by the Dept. of Agriculture
This is one of the best government-backed, 100% financing options. This no money down mortgage program has been around for decades, but it has soared in popularity recently. It has no down payment requirements, and flexible credit standards.
The 100% financing USDA loan is backed by the USDA and helps rural home buyers to get a loan they can afford. It is a type of rural development loan.
To qualify, you only need to have the income to support the house payment, but there are income limits. Those limits must be within USDA standards.
One limitation on the program is that you must be buying a home that is considered ‘rural’ according to USDA. This does not mean you must buy a home in the sticks; there are some suburban homes near major cities that may qualify. Check with the USDA website to see if your home qualifies. Your real estate agent also can assist you.
USDA also allows the seller to pay closing costs, if he agrees to do so. Therefore, you can theoretically get into a home without a down payment or closing costs.
#2 No Money Down Mortgage Guaranteed by the Veterans Affairs
Another government-backed mortgage option is the VA loan. This loan requires you to have at least two years of military experience, or 90 days if you are still serving.
According to the VA, 23 million people may be eligible for this 100% financing home loan, but some do not know they are eligible.
Let’s be clear: If you are eligible for this 100% financing loan, you need to take advantage of it! VA loans are not only a popular no money down mortgage: They also have very low rates and there is no mortgage insurance required.
When this loan is compared to other low money down loans, this is the most affordable. So, you should definitely get a VA loan if you have at least two years of military experience.
A VA loan has 100% mortgage plans available and allows the seller to pay all closing costs.
Lending standards with this loan are reasonable too; you can have a credit score as low as 620 and still be approved.
#3 Financing with the Federal Housing Administration
The Federal Housing Administration or FHA has low down payment loans of 3.5%. This can be a lot of cash for a home, but there are ways to make this a no money down mortgage.
FHA guidelines state that you may receive your down payment funds in the form of a gift from a family member or other eligible down payment gift source. You do not have to have your own cash for the down payment.
Many first time home buyers get help from family for their first home loan, so it always is worth asking close family members if they can help you out.
This is technically a 3.5% down loan, but if you have the source for a gift, it can be a 100% financing loan. FHA also allows the seller to pay part of your closing costs, so you can have very little cash out of pocket to close this loan.
The FHA also offers the Good Neighbor Next Door home loan. Teachers, police officers and some other public workers may qualify to buy a home with only $100. This is not exactly 100% financing, but who can complain about buying a home with only $100 down? If you don’t have that, you may not want to buy a home anyway.
There are not as many no money down mortgage opportunities today as a decade ago. But the above government-backed mortgage loan programs can in some cases be 100% financing loans.
Whichever program you choose, you will need to talk with your specific lender to determine if you qualify for no money down or limited money down. Also, credit, income and debt to income ratio criteria vary widely from lender to lender. Please shop around so that you can find the best mortgage loan deal for your first home purchase.