Saving for a down payment is always a good idea but not always an option for home buyers that want to get on the property ladder sooner rather than later. It’s also challenging to save at a time when the cost of living is so high and rent seems like a rather pointless expense when you might be ready and able to buy your own home.
But how can you purchase a home with no money down?
Zero-money down mortgages were made available in the wake of the subprime crisis for low income households and people with lower credit scores. Let’s take a look at the two programs you might consider for a home purchase with no money down payment.
Zero-Money-Down Mortgages (Government Backed Loan)
Zero-down mortgages are government backed loans from commercial lenders. Select individuals can apply for these loans with a sufficient income and credit rating, not to mention documentation to support the application. Just so you know, the federal government commits to covering the cost of any repayments should the buyer stop paying back the mortgage.
While this option is not readily available like it was during the financial crisis, this option allows lenders to assist borrowers that might have a somewhat riskier finance or credit profile. More importantly, these loans can sometimes allow applicants with a high credit score (620+) to purchase a home with no money down payment. Needless to say, not everyone has such an impressive credit score and this is precisely where VA and USDA loans come into play…
Home Purchase with VA Loans and USDA Loans
VA Loans (Veteran Affairs Loans )
VA loans are available to military veterans and families and this insurance program usually covers up to $420,000. Mortgage insurance can be wrapped into the loan and no down payment is required. In order to qualify for a VA loan, proof of military service is required and a debt-to-income ratio of 41% is standard. However, qualifications of a VA loan change from one lender to the next.
USDA Loans (US Department of Agriculture)
People in specific regions of the United States may be eligible to apply for a USDA loan. These loans are mostly intended for designated remote areas but some residents living close to small towns might still be eligible for the program. As part of the application process, you must also fall within certain thresholds as the loans are designed for low-income households. You must also have a credit score in excess of 600 points but no down payment is required for this option.
Should You Purchase a Home with No Money Down?
Home purchase with no money down payment will mean higher interest rates and the fact that you do not own any of the home outright. However, saving for a down payment is a major hurdle and one that can take years to achieve. With this in mind, a home purchase with no money down is never easy but the above options provide a starting point for buyers that want to get started, regardless of their financial circumstances.
To learn more about no-money down loans, call City Creek Mortgage and speak with one of our salary-based loan officers.