Buying a home with no money down allows a home buyer with little to or no deposit by using a zero down home loan 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 options too.
Now is an excellent time to buy with no money down home loan. Some first time 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 mortgage rates 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.
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 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% down loan and even get closing cost help. You also will get a very low interest rate.
If you are buying in a more expensive region of the country, you can get a loan up to $636,000. This higher loan amount can be essential if you are buying in CA or HI.
No Down Payment 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 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, no down payment loans 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 loan 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 loan, you still may be able to get a zero down house loan today.