For many, the first roadblock to buying a home is saving enough money for the down payment, especially with an unpredictable housing market. Luckily, there are several mortgage options that require no money down — so you don’t need to come up with the traditional 20 percent down payment.
Can I Buy a House With No Money Down?
Through various loan and assistance programs, you can buy a home with no money down, especially if you’re a first-time home buyer. For many first-time home buyers, purchasing a home with no money down offers many benefits, such as:
- Being able to afford a house sooner.
- Having more savings available to cover expenses such as closing costs.
- Keeping more money in your pocket for situations like buying new furniture or putting aside for emergencies.
1. Homebuyer Down Payment Assistance
Homebuyer down payment assistance is when an organization like a government agency, mortgage company or community organization offers cash grants, tax incentives or lower mortgage rates to help someone purchase their first home.
There are more than 3,000 down payment assistance programs throughout the United States, such as:
- Tax credits on local, state and federal levels.
- Forgivable loans specifically for down payments.
- Discounted mortgage rates specifically for eligible buyers.
- Closing cost credit.
- Cash grants.
2. USDA Loans With No Money Down
The United States Department of Agriculture (USDA) also has a zero-down loan program typically referred to as a USDA loan or Rural Development loan.
However, you and your home must meet specific criteria before applying for this loan. First, you must buy a house in a rural or suburban area. The home you plan on purchasing must also be your primary residence and a single-family unit.
You must meet a few financial requirements as well, such as the combined income of your home not exceeding 115% of the median income for the area. Your debt-to-income ratio must be 41% or less, and the portion of your income you use to make payments cannot exceed 29%.
3. VA Home Loans With No Down Payment
Perhaps the most well-known way to buy a house with no money down is the Veteran’s Affairs home loan. A VA mortgage doesn’t require a down payment, and eligible borrowers include active duty personnel, military veterans, past or present National Guard or Reserve members or the surviving spouse of a deceased veteran.
If you put down less than 5%, you can pay a one-time VA Funding Fee that equals 2.15% of your loan value in place of mortgage insurance. However, before you can access these benefits, you need to verify you meet the following requirements:
- 90 consecutive active service days during wartime
- 181 consecutive active service days during peacetime
- More than six years in the National Guard or Reserve
- At least 90 days with 30 consecutive days under Title 32 orders
- A discharge due to a service-connected disability
You can also qualify if you are the spouse of a service member who died from a service-related disability or in the line of duty.
Conventional Loans for First-Time Home Buyers
Many conventional loan options are available to help first-time homebuyers afford the home of their dreams. Some examples of these loans include:
Conventional Loan 97
A Conventional Loan 97 is a loan option from Fannie Mae, the largest purchaser of home loans in the United States. This loan option allows borrowers to apply for a conventional mortgage with a 3% down payment. Applicants do not have to personally contribute to the loan but can use mortgage gifts or grants to cover their down payment.
Since the Conventional 97 Loan has fewer up-front costs and no permanent mortgage insurance requirements, it’s an alternative to Federal Housing Administration loans.
HomeReady Mortgages
Another loan option from Fannie Mae is HomeReady Mortgages. This loan option is ideal for low-income buyers, and borrowers must have a 3% down payment and a 620 credit score to qualify.
Borrowers must complete home buyer education if both buyers are first-time home buyers, in addition to both buyers submitting proof of income. Like a Conventional Loan 97, buyers can use gifts or grants to cover their personal contribution for the down payment.
FHA Loans for Buyers With Low Credit Scores
If you have a low credit score, you can still buy a home thanks to Federal Housing Administration (FHA) loans. An FHA loan has flexible credit score requirements, and borrowers can apply with credit scores as low as 500.
The down payment requirement may change based on your credit score, and FHA loans require borrowers to submit proof of their employment and income. Your debt-to-income ratio must be under 43% or 56.9% with compensating factors.
Choose Homesite Mortgage for an Improved Lending Experience
At Homesite Mortgage, we understand every borrower has a unique set of needs, so why would we offer a one-size-fits-all lending option? Our team of mortgage professionals works directly with each borrower to develop a flexible lending option.
As a regional lender, we understand the value of giving back to our communities. However, our community focus doesn’t mean we’re limited in options. We offer a wide array of financing solutions. Learn how we can help you transform the lending experience and make your home-buying dream a reality by contacting us today.