Buying a house with no down payment is certainly a possibility in today’s housing market. The key to finding the right program for you is to connect early with a good lender that will guide you through the loan process and recommend a good no money down loan based on your financial profile. In the article that follows, I will talk about the keys to success on how to buy a house with no money down.
Can you Buy a House with No Money Down?
There are several avenues available for home buyers to purchase a home with no money down. The thing to understand about these no money down loan programs is they all have their own unique requirements and buyers must qualify based on the mortgage guidelines specific to each program.
Buyers using these programs should also remember that while your down payment will be covered if you qualify for the no money down loan, the home buyer is still responsible for standard mortgage closing costs anytime you buy a home.
Buying a House with No Money Down
There are two government mortgage loan programs that allow buyers to buy a home with no money down. These two programs are the USDA home loan program and the VA home loan program. Both are excellent loan programs that allow home buyers to get into a home with no money down. However, they both have very specific requirements to meet in order to qualify to use the program.
VA Mortgage Loan for Military home buyers
A VA loan in my opinion is one of the best home loans available today. The main requirement of course is that you need to be either active military or a U.S. Military Veteran. But if you meet that requirement and you have VA eligibility then a VA loan should be at the top of any eligible homebuyers list.
Let’s look at some of the highlights that make a VA loan a great choice for home buyers:
- No down payment required
- Very competitive interest rates
- No mortgage insurance required which helps a client’s debt-to-income (DTI) ratio
- Very credit friendly loans for certain past credit events that may appear on a borrower’s credit report
To start the process to confirm your VA eligibility, reach out to your mortgage loan officer and he/she will let you know what to provide to verify your VA loan eligibility.
How Does a USDA Loan Work?
The USDA loan program is administered by the United States Department of Agriculture which is tasked to provide home loans to qualified applicants in eligible rural areas to encourage homeownership in these areas. USDA loans are very good loans that require no down payment and give eligible buyers a very good opportunity to buy a home. However, these loans have a narrow range of eligibility requirements that you will want to make sure you can meet before moving forward with this program.
Let’s look at some of the requirements where if you check all of the boxes you may be eligible to buy a home under the USDA loan program:
- Income eligibility: income must be at or below the applicable low-income limit for the area where you wish to buy
- Property eligibility: normally limited to rural areas with a population of less than 35,000
- Credit Score score of at least 640
- Debt-to-Income ratio (DTI): in most cases a debt-to-income ratio of 41% or less is required
- Must be a Primary residence, no multi-family purchases allowed
These are the only two standard loan programs that allow no down payment to get into a home. The other option for home buyers to buy a home with no money down are down payment assistance loans.
How to Buy a Home Using Down Payment Assistance
Down payment assistance loans are readily available here in Arizona for qualified borrowers. I close several of these loans each month for well-deserving borrowers and the programs make the qualifications reasonable and attainable for a wide range of borrowers.
Generally, the qualifications to receive down payment assistance are as follows:
- Income eligibility
- Credit requirements: normally a credit score of 640+ is required
- Debt-to-income (DTI) ratio: 45% or less, though there are some exceptions to this
If you know these requirements in advance of when you want to buy a home, then you can manage your finances and credit so you meet the credit and debt-to-income ratio requirements by the time you are ready to buy.
The hardest part of buying a home for most people is saving for a down payment. Here in Arizona, this obstacle can be overcome with ease for those that have their finances in reasonable order.
If you want to learn more about any of the programs above, please reach out to me for a complimentary mortgage consultation and I would be happy to help you achieve the dream of homeownership.
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