How to Buy a House with No Money Down (or low-down payment)

Buying a home is a big deal and requires a lot of financial planning because it is normally the largest purchase a person makes in their entire life. The easy and fun part is figuring out what kind of cabinets you want your new home to have or how many bathrooms, the hard part is figuring out how you are going to pay for it.

Not everyone has the money to put a large down payment on a home, because of the size of investment buying a home can be, 10-20 percent can just be too large a number for most people.

If you are in this situation and are ready to buy a home but don’t have the money for a big down payment, you are in luck, there are many ways to buy a house with no money down or very little down, and a few of them will be shown below.

A Few Ways to get a mortgage with zero down 

One of the main ways to get a mortgage with no money down is with a government loan. These are insured by the federal government (hence the name) and this means that the bank or other money lender is not at risk if the home is foreclosed on or if the buyer doesn’t pay. This will help the lenders trust that they are safe doing business with you because of the government backing. There are a few main ways that a no-money-down mortgage backed by the government can be obtained.

1.  USDA Loans

If you need a loan but need to be able to obtain this with no down payment, a USDA loan is a great option for you.

The U.S Department of Agriculture (USDA) helps individuals with low to medium incomes buy a home by giving several different loan and grant programs. These programs help give home buyers low-interest fixed-rate loans by providing financing to individuals that meet the qualifications required by the USDA Rural Development division.

Two of the programs mentioned above given by the USDA are:

1. Section 502 Direct Loan Program: Those with low or very incomes that need to buy a house are assisted by this program. They help these individuals by giving payment assistance which helps in the home buyers’ ability to pay their monthly mortgage, which is very important to whether lenders will approve a loan or not. This program is for buyers in rural and county areas specifically.

2. Section 502 Guaranteed Loan Program: This program is somewhat similar to the section 502 Direct Loan Program by providing low-income households with loans but also helping moderate-income households obtain mortgages in eligible rural areas. This program gives lenders a 90% guarantee to reduce the risk of loaning the funds to buyers that are eligible for the program.

Both of these programs are great because they do not require a down payment, to find out of if the home you are wanting to buy qualifies for these programs since they have to be in a rural area, you can view that information here.

There aren’t only qualifications for the home being purchased but are also requirements the buyer must meet in order to be eligible for a USDA loan. These loan requirements include:

·  Your DTI (debt-to-income) ratio must be 41% or lower, to ensure you are able to pay the loan.

·  The home being bought is required to be the primary residence that you live in.

·  You are required to show that you can manage debt, by doing things like paying your credit card payments and car loan payments on time, etc.

· Your income must not exceed to required specified limits to be eligible for the loan, these income limits vary depending on the area you live in and the type of program being used.

2. Veterans Affairs (VA) Loans

The next great option to get your house with no money or little money down is VA loans. These loans are given by banks, mortgage companies, and credit unions and are a great way to ensure you get that house you are after, even if your funds are limited.

These loans offer a partial guarantee by the Department of Veteran Affairs and typically have low or no down payment requirements, on top of that, many VA loans have lower interest rates than the standard mortgage.

Another great benefit of VA loans is that they aren’t as strict in the requirements for things like your DTI (debt-to-income) ratio and allow for lower credit scores which is helpful to many people that have struggled in the past to make payments but still need a mortgage loan.

For your home to qualify for a VA loan with no down payment, the home must be bought for lower than the appraised value, this obviously helps the VA ensure that they don’t lose the money loaned if the home is foreclosed on.

There are a few requirements an individual must meet in order to be eligible for a VA loan, these include:

·  The individual must be either a veteran, a member of the National Guard, an active-duty service member, in the Reserves or the spouse of a deceased veteran.

·  They must have a Certificate of Eligibility (COE) from the VA

There are other requirements that vary depending on if the person is an active-duty member or former member of the military. Here is further information on the requirements for VA loan eligibility

3.  Private Lender Zero Down Loans

To get a mortgage loan with no down payment, government programs aren’t your only option. There are also banks and other financial institutions that offer this ability as well.

A few examples of lenders who offer this with no money down are Navy federal (must be a member) and North American Savings Bank. 

No Money, No Problem

As you can see, you don’t need a large down payment to buy a house. Above are just three of the ways to get the house that you want.

There is a path for everyone to get a home with zero down, if you’re a veteran an obvious choice is a VA loan, if you are in the very low-income category, a Section 502 Direct Loan through the USDA would be a great fit.

The point is everyone deserves to be able to buy a house. Not everyone has the luxury of being able to accumulate a big enough savings account to pay a huge down payment on a house, but when using the types of loans above, anyone can buy a home no matter their financial limitations.