How to buy a house with $0 down: First-Time Home Buyer
Saving for a down payment on a home can be difficult! Many homebuyers aren’t sure how much money they even need to qualify for a mortgage. What most home buyers don’t know is that it’s possible to purchase a home with no down payment whatsoever...
But you may be asking, how? There are loans out there that you can qualify for and you can take advantage of low rates... many with zero dollars down.
We’ll go over some options that you have when you want to buy a home at $0 down...
The Zero-Down Mortgage
Sometimes called a no-down-payment mortgage, this is a home loan you can get without any kind of down payment. Traditionally, a homebuyer would pay a percentage of their home’s total cost at closing. For example, if you were to buy a home for $500,000 with a 20% down payment, you would pay $100,000 upfront. This payment at closing would be your down payment.
To acquire a mortgage with no down payment, you would take out a government-backed loan. These types of loans are insured by the federal government and are offered to people who need financial assistance to purchase their home. Government-backed loans are less risky for lenders, and as a result, allow them to offer better deals to more risky financial profiles. But...
How exactly do these types of loans work, and who is eligible?
USDA Loans
Backed by the United States Department of Agriculture, USDA loans are offered to encourage community development in both rural and suburban areas. You can get this loan with both low fees and at $0 down.
Your home must qualify to be eligible for a USDA loan. By using this USDA map of eligible areas, you can find out if you’ll qualify. Remember, you must choose a single-family home, and establish that the home is your primary residence.
You also need to financially qualify to be eligible for a USDA loan. The combined gross income within your household must not be more than 115% of the median income within your county. Also, you must have a FICO score of at least 640, and a debt-to-income ratio no greater than 45%.
VA Loans
Backed by the Department of Veterans Affairs, VA loans also have the benefit of low fees, and zero dollars down. If you’re an active-duty service member, member of the National Guard, veteran, or the spouse of a deceased veteran, you might qualify for a VA loan. To be eligible for a VA loan, you’ll need a FICO score of at least 580, and be able to check off one of these boxes:
· Served 90 consecutive days of active service during wartime
· Served 181 consecutive days of active service during peacetime
· Served for more than 6 years in the National Guard or Reserves or at least 90 days under Title 32 orders, with at least 30 of those days being consecutive
· Be discharged by reason of service-connected disability
· Be the spouse of a service member who died in the line of duty or from a service-related disability
Summary: Buying a home with $0 down
While it was once a general rule-of-thumb that a down-payment of 20% was expected, homebuyers today have many options for low or no-down-payment mortgages. Government-backed USDA and VA loans can allow you to purchase a home at zero dollars down, and at low rates.
In 2021, rates are historically low: fifteen years from now, today’s rates may look like a deal. Right now the time is better than ever, and you can take advantage of a no-down-payment mortgage to get started on your home-buying journey today.
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