Planning on buying a new home? That’s a wonderful idea! Buying will allow you to have the freedom to build your safe and happy place without any worries. But saving up for huge down payments in this economy can be tough.
Can you buy a home with no money down? Yes! There is one way to get a home without putting a down payment. These loans have made housing more accessible for many.
Get A Free Mortgage QuoteCan You Buy a House with No Money Down?
There are several options for people who want to buy a home but don’t have enough funds to make a down payment on the loan.
Some government-backed loans like USDA loans and VA loans for veterans are great options. These are designed for people who want to get a home in rural regions. You may be able to qualify for them right now.
There are also many down payment assistance programs for buyers as well as programs for first-time buyers. These programs have grants that cover the down payment costs.
Such options remove the heavy upfront costs for those with limited savings. However, their eligibility criteria vary depending on which program you choose. Also, factors like the debt-to-income (DTI) ratio, credit score, and income limits play a role. You should also note that while these do make housing more accessible, they result in higher monthly payments. You will also have to pay more on the life of the loan due to interest rates.
How to Get No Money Down Home Loans?
USDA and VA loans are the two main government-backed loans that you can try out.
You are not required to make a down payment for them, but you may need to meet some other criteria. They will have some location, credit score, and income requirements. For VA loans, you will also need a Certificate of Eligibility and documents to prove you are a veteran. You will also need to get a VA appraisal on the home you are planning to buy to make sure that it meets the Minimum Property Requirements (MPRs).
There are also some special assistance programs for down payments, but they are largely dependent on your field. They may be specifically for certain occupations like medical professionals, teachers, firefighters, or other employees in the public service sector. Some are also specifically for homes in a particular neighborhood.
Not all programs will completely eliminate down payments; some may reduce the overall costs so that it is more affordable for you.
Ways to Get a No-Money Down Home Loan
With government-backed mortgages, it has become easier for first-time home buyers to access housing.
Here are some ways to get a home without needing savings for a down payment.
1. Apply for USDA or VA Zero-Down Home Loans
VA loans are specifically for active military members or veterans. They don’t need mortgage insurance or a down payment to get. However, there are some requirements that you need to meet. For example, you should have served at least 90 consecutive days in wartime or 181 days in peacetime to be eligible.
You can learn more about VA loans here.
USDA loans are for home buyers who live in rural areas; some suburban areas are also eligible, so you should check the information carefully.
Here are some common conditions that you may have to meet:
● Your income should not be more than 115% of the median income of the area you are applying for
● Show that you cannot qualify for a conventional mortgage that requires 20% down payments
● Have good standing for any old federal loans like student loans
● Proof of legal residency or citizenship
● Select a property in eligible rural areas
● Prove the property is modest compared to local housing
● Confirm that the condition of the home meets the HUD standards
You can check out USDA loans here.
2. Try First-Time Home Buyer Programs
First-time home buyer programs are offered at federal and state levels. You can take advantage of the low-interest loans or grants that will help you cover either closing costs or down payments.
Some programs have second mortgage options that you can use along with the primary mortgage to cover costs.
3. Ask for a Down Payment from the Family as a Gift
If it’s possible, getting a family member to give you the down payment as a gift can also work in your favor and reduce the financial burden. Lenders will accept this as a source but you will need to provide a gift letter. It will state that the donor is giving the money as a gift, not as a loan. It will also highlight your relationship with the donor, the amount you are receiving, and the property’s address.
4. Get Lenders to Pay Closing Costs
One of the upfront costs of loans are closing costs for the loan agreement. The lender can cover these costs but it will result in a higher interest rate. This means that you will have to pay more in monthly payments over the life of the loan.
5. Get the Seller to Pay Closing Costs
You can also try seller concessions to get the seller to pay all or a portion of the closing costs. It can be part of the negotiations for the agreement. It can cover different fees like attorney fees, property taxes, mortgage points, and even closing costs.
Requirements for No-Money Down Home Loans
Here are some common eligibility requirements for such loans. They might differ depending on the plan you get, so make sure to do your research carefully without applying.
Credit and Income
There may be some credit score or income minimum limits that lenders can set. Lenders also take a close look at the debt-to-income ratio to access the risk level of the loan. It will help them understand if you can afford to make the monthly payments.
A credit score of at least 620 is needed. The better the score, the better the interest rates you will receive. Since you are already applying for a loan without paying down payments, you will already receive a high interest rate. Hence, make sure your credit score is high enough to offset a higher rate of interest.
Get A Free Mortgage QuoteFinancial Stability and Employment History
Employment history proves that you have been consistently employed. This makes you a reliable investment and offers lenders assurance that you can play back the loan.
Assets can also prove financial stability, so you may have to show those, too. For example, any investment or savings account can be a positive factor in your eligibility for a mortgage.
Pros and Cons of No-Money Down Home Loans
It is important to assess whether this is the right option for you.
Here are the pros and cons to help you decide!
Pros
● You don’t have to spend a huge amount of savings to buy a home
● You can buy a home sooner than you would have if you had to save for a huge down payment.
Cons
● You will pay more interest on the loan
● You may not be able to get a home in particular cities or neighborhoods
● You will own less home equity
● May have additional fees
Conclusion
So, can you buy a home with no money down? Yes! There are plenty of options you can explore.