3 Tips to Buy Home with a No Down Payment

Is not being able to afford a down payment stopping you from being able to buy a house? There are ways to get a new home without covering a down payment— you just need to know where to look. 

Since most down payments today are 20% of the home loan, saving that much money can be impossible for many as the prices of houses shoot up each year. However, if you use these three tips, you won’t need to worry about it. Here’s what you need to know!

1. Consider a VA Loan

If you qualify for a VA home loan, it’s one of the best down payment-free options today. These loans require you to be a veteran or spouse of a veteran, so they’re not available to everyone. However, they have outstanding benefits for those who do qualify. The Department of Veterans Affairs backs them, making the applicants more trustworthy.

VA loans don’t have down payments because the VA guarantees the lenders protection from defaults. That means they receive better terms than many other loans, even others that don’t require down payments.

Plus, with the backing of the VA, these loans often don’t require a down payment. Or, if they do, the payment amount is incredibly low. The loan terms are also more flexible, making buying a home easier for those with low credit and high DTIs. You won’t need PMI either with this loan option.

While VA loans don’t have mandatory down payments, you can still pay one if you want to. Doing so can reduce some of the fees associated with the loan.

Overall, you’ll want to consider applying for a VA loan if you think you’re eligible. They make funding a home easy since you won’t need to save up for a down payment.

2. Check If You Qualify For a USDA Loan

Another great tip is to check if you can qualify for a U.S. Department of Agriculture (USDA) loan. These loans benefit low and moderate-income people moving to rural areas. The program is there to assist with developing these areas. You’ll want to check if the place you’re moving to qualifies before you try applying. Keep in mind that farms are not eligible.

Since the USDA backs these home loans, you can get one without putting any money down, and you won’t have to pay as many fees. Some suburban areas also qualify, so you should always check!

Although, you will also need to meet these conditions before qualifying:

• The home must be your new primary residence.
• The home must be a single-family unit.
• Your gross household income cannot be above 115% of the median income in that county.
• Your credit score is at least 640 (it can be lower, but your approval odds go down).
• Your DTI is not above 45%.

So, if you’re planning on moving to a rural or suburban neighborhood, you’ll want to look into USDA loans. They don’t require down payments and are suitable for many people. These mortgages come with many benefits, too, but you need to live only in specified areas to get one. The location you choose is just as important as the loan you get. Many buyers search for growing communities that have a mix of urban and suburban life. For example, a search for houses for sale in Milton (or elsewhere) shows what is available in a popular market. This area has many different properties that fit the loan programs mentioned. You can find small starter homes or larger family houses. It helps to see the local market before you pick a mortgage path.

3. Research Private Zero-Down Home Loans

While the previous two tips involved government-backed programs, you can also get a down payment-free loan through some private lenders. They’re a lot harder to find but still worth checking out! You’ll need to do more research into these options to make sure that you’re getting the best possible deal.

For example, Bank of America offers a Community Affordable Loan Solution, which doesn’t require a down payment or various fees. You won’t need mortgage insurance or a good credit score to apply. However, you will need to be a first-time home buyer. This program aims to improve the racial gaps in homeownership today.

Additionally, you might want to look into North American Savings Bank and the Navy Federal Credit Union. 

It’s worth noting that lenders who offer zero-down payment options often have very strict guidelines you’ll need to meet to qualify. You must research them to ensure you can meet their criteria before applying.

What If I Don’t Qualify For a Zero-Money Down Loan?

Not everyone qualifies for the loan options listed above. However, that doesn’t mean you’ll need to save up to 20% for your house. Instead, you can likely qualify for a low-down payment loan. These loans often only require you to save between 2% and 5% for the initial payment.

According to Nerdwallet, some of the best low-down payment options come through New American Funding, Northpointe Bank, and Flagstar Bank. North American Funding is the best choice because the bank offers various down payment assistance programs and only requires you to pay 3% of the loan upfront. Flagstar also offers a 3% down payment, but it’s only for first-time home buyers, and there isn’t down payment assistance.

Federal Housing Administration (FHA) loans are another great choice you’ll want to look into. The FHA insures the loans so that you can buy a home with a significantly lower down payment. However, the interest rates are usually higher than other loans.

If you can’t qualify for a zero-down payment loan, you don’t need to give up on your dream of owning a house. Instead, you’ll want to consider finding a low-down payment option. These loans can save you thousands on the down payment cost, making it easier to move into your new home.

Never Give Up On Homeownership

To summarize, you’ll have different options for getting a house without putting money down. The best loans you’ll want to consider first include VA and USDA loans, although you might also be able to find a private loan with zero-down.

Even if you find you don’t qualify for zero-down, going for a low down payment is better than having to pay the full 20%. For many families, paying a 5% down payment is much more affordable, making it possible for them to own a home. Overall, you don’t want to let a high down payment get in the way of moving into your dream home.

Photo by Jessica Radanavong on Unsplash