Home Financing with No Down Payment

After the Subprime mortgage crisis in 2007, many people were told that there were no more 100% financing options for purchasing a home. This is false. In 2017, there are multiple options for purchasing a home with no, or a very small, down payment. There is a good chance that you qualify for one of these loans.

It’s no secret that the bank wants to be paid back for the loan that they offer you. Making you pay a 20% down payment gives them the peace of mind that you are not only able to pay them back, but you have been saving for your new home and are good with managing money. After multiple studies, banks and lending institutions have found out the higher the down payment that you pay, the least likely you are to default on your loan.

If you are wanting to purchase a home, but haven’t saved for a down payment, here are some great options.

The USDA Home Loan

The USDA loan is a government-sponsored loan that exists to help develop rural communities by encouraging home ownership. To qualify for this loan, you have to have enough income to support your house payment, but you also can’t make too much money. There are limits set by USDA. Some other requirements include that you must purchase a home that’s within USDA’s boundaries geographically. This sounds like the homes would all be in rural areas, but many areas are in the suburbs.

Another benefit to the USDA loan is that the seller can agree to pay your closing costs. This means that you don’t have to come up with any money out-of- pocket to purchase your home. The USDA Home Loan is a great way to purchase a home if you are currently renting. With the low interest rates, and no down payment, it may even be cheaper than your current rent.

The VA Home Loan

If you have 2 years of military service, or have currently been serving for a few months, you are most likely eligible for a VA loan. 23 million people (1 in 13 in the US) are eligible for a VA home loan and many of them don’t even know it. VA loans have a zero down payment, very low interest rates, and they don’t require monthly mortgage insurance fees like PMI. Like the USDA loan, the VA loan also gives the seller the option in paying some, or all, of your closing costs.

To qualify for a VA loan, you must also have a 640 credit score, but some lenders allow you to get away with a score as low as 620. If you’ve ever been in the military, it would be worth it to check your eligibility for a VA loan.

The FHA Home Loan

The FHA Home Loan requires a 3.5% down payment, but what many people don’t know is that you can get around this by receiving a gift for the down payment. The gift can be from a family member, non-profit organization, or other eligible gift source. Although this isn’t technically 100% financing, if you’re able to receive a gift, then you don’t have to come up with any money out of your pocket.

Another option with an FHA loan is that they offer the “Good Neighbor Next Door” loan. If you are a teacher, police offer, or some other type of public employee, you can purchase a loan with just $100 down!

Find a good mortgage company to work with, and see if you’re eligible for one of these home loans with no down payment. It may be better than throwing away money on rent, and many times your payments will be even cheaper than renting.