5 Surefire Tips for Buying Your First Home with No Money Down
Raising the down payment is probably the most difficult step towards purchasing your first home. Not only is it an uphill task saving for the amount required, it’s also quite scary to have to spend most, if not all, of your savings on a home while there are other competing needs. So, are you wondering how to buy a house with no money? Let’s go over your options below.
- VA Loans
Are you a veteran and need a 0% down mortgage? Then a VA (Veterans Affairs) loan is your best bet. The loans are made available through the U.S. Department of Veterans Affairs and come with 100% financing. To qualify for this loan, you need a good income, a Certificate of Eligibility provided by VA and good credit. Successful applicants enjoy benefits such as limited closing cost, no monthly mortgage insurance premiums, and 0% down payment. You will be charged a compulsory VA funding fee, which is only 2.15% of the total loan amount. This loan is available through a variety of lenders. Talk to a mortgage broker to get the best deal.
- USDA Loans
If you live in a rural area, you can access home loans backed by the U.S. Department of Agriculture. A rural area is anywhere in the U.S. outside the major cities. USDA loans are meant to encourage home ownership in these areas. The loans have a 0% down mortgage and are meant for families with low to moderate income levels. Nonetheless, you can get a loan if you earn up to 115% of the median family income in the U.S. Mortgage insurance premiums on this loan are lower than any other loan you can get. To qualify for the loan, you need to participate in the USDA program.
- Down Payment Assistance and Grants
You can buy a home with 0% down payment by getting someone else to pay it for you. Down Payment Assistance programs are usually operated by local authorities and state housing finance agencies. You need a decent credit score and have an income that is thoroughly documented. Assistance is sometimes offered as a grant, meaning it doesn’t have to be paid back. Applicants can earn as much as 140% of the median area income and still qualify. Other down payment assistance is given in the form of interest free loans that are usually structured as a 2nd silent mortgage that’s paid back after the house is sold or the mortgage paid off. This is how to buy a house with no money.
- 80/20 Loans
These types of loans are also referred to as piggyback loans. They allow you to purchase your home using two loans. This was a popular strategy before the financial crisis. Today, you will need to have an excellent credit and income profile. If you’re successful, you will get a first mortgage that covers 80% of the cost of the home followed by another that covers the remaining 20%. The second mortgage will have a higher interest rate than the first one. Pop into a local credit union or bank to find out if they provide 80/20 loans.
- Navy Federal Loan
If you’re a member Department of Defense and the Coast Guard, then you qualify for 100% financing on your mortgage. All members including active-duty personnel, civilians and contractor personal and their families qualify for this type of loan. This loan is similar to the VA loan, only that the interest rate is a bit higher.
With the information above, you can now start checking out those luxury condos you’ve been eyeing without necessarily having to raise the money for the down payment.