Purchasing a home is easier than many people believe.
The days of needing tens of thousands of dollars to become a homeowner are long gone. A 20% down payment is no longer required to purchase a home. In fact, no-money-down mortgages are currently available to you.
If you've been wondering how to buy a house with no money down, keep reading to get started on your path to homeownership.
There are down payment assistance resources available that provide a clear path to homeownership. Government-backed USDA and VA loans can allow you to buy a home with $0 down
1. Homebuyer Down Payment Assistance
Down payment assistance (DPA) can assist you in purchasing a home without immediate cash. There are several federal, state, and non-profit programs available to first-time home buyers.
Down payment assistance (DPA) programs provide loans or grants to home buyers in order to reduce the amount they need to save for a down payment.
If you meet the requirements, you may be eligible for an outright grant or a low- or no-interest loan to cover your down payment. Some DPA funds can also be used to cover closing costs.
The majority of DPA programs are only available at the local level. And eligibility requirements differ from program to program.
Types of down payment assistance programs
There are four main types of down payment assistance:
Grants: Money that is given to you and does not have to be repaid.
Loans: Second mortgages that are paid on a monthly basis in addition to your primary mortgage.
Deferred loans: Second mortgages that have deferred payments that must be made only when you move, sell, or refinance.
Forgivable loans: Second mortgages that are forgiven over a set number of years (often five, but maybe up to 15 or 20). These only need to be repaid if you move, sell, or refinance too early.
How to find down payment assistance near you
You can Google “down payment assistance grants in [state, county, or city].”
You can also speak with your loan officer to help you find down payment assistance programs for which you qualify.
The U.S. Department of Housing and Urban Development (HUD) also lists many homeownership assistance programs, including DPA, on its State Pages.
2. USDA Loans With No Money Down
USDA loans have no down payment or credit score requirements. These loans offer subsidized interest rates in order to encourage increased homeownership in rural areas.
Applicants must demonstrate their creditworthiness. To apply, lenders typically require a credit score of 620 or higher.
USDA loan applicants must:
Be a legal permanent U.S. resident.
Maintaining a dependable income
Have a household income matching 115 percent of the area’s median income or lower.
Be the primary residence in a rural area
3. FHA Home Loans With No Down Payment
FHA loans, which are backed by the Federal Housing Administration, are mortgage loans with reduced down payments and credit standards, making them more accessible to a wider range of consumers. You can acquire an FHA loan for up to $822,375 with as low as 3.5 percent down depending on where you reside. You must have a credit score of at least 580 to qualify for an FHA loan with Rocket Mortgage.
The disadvantage of an FHA loan is that you must pay an upfront mortgage insurance cost of 1.75 percent of the total loan amount, as well as monthly mortgage insurance payments. You may have to pay monthly mortgage insurance for the life of your loan, depending on the size of you.
FHA Income Requirements
Your eligibility for an FHA loan is not based on a specific income level, but you must demonstrate that you have a consistent employment history. Your income must be verifiable by sharing pay stubs, W-2s, federal tax returns, and bank statements with your lender. Other forms of verification may be required by your lender.
4. VA Home Loans With No Down Payment
These are perhaps the biggest advantages to a VA loan. You don’t need a down payment. None whatsoever. Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down.That’s up to $12,500 on a $250,000 home purchase. VA loans make home ownership possible for members of the United States military, veterans, and their spouses. VA loans, like USDA loans, do not require a down payment or a credit score, though most lenders prefer a credit score of 580 or higher.
To apply for a VA loan, you must have a certificate of eligibility (COE). This attests to your service history and current duty status, proving your eligibility.
If you are approved for a VA-backed purchase loan, you can use it to:
Purchase a single-family home with up to four units.
Purchase a condo in a VA-approved development.
Purchase and renovate a house
Purchase a manufactured home or a lot
Construct a new house
Make changes or add new features (such as solar power) to your home to make it more energy efficient.
VA eligibility requires:
You participated in active wartime service for 90 days.
You served 180 days of active duty during peacetime.
You served in the National Guard or Reserves for six years.
You are the surviving spouse of a service member who died in the line of duty or as a result of a service-related disability.