Do you want to buy a house with no money? Then follow this article to know more about it.
Buying a home is more accessible than the way people think.
Gone are the days of needing thousands of dollars to become a homeowner. Today you don’t need a 20% down payment to buy a home. There are no money-down mortgages available to you right now.
Maybe you’re wondering how to buy a house with no money down, keep reading to start your journey to homeownership.
How To Buy a House With No Money
If you can live in your dream home for zero dollars down, will you still select the rent?
You don’t need a huge down payment to buy a home. First-time buyers out down an average of 7%. The chart below highlights the median for payment for first-time buyers since 1989 based on data from the National Association of Realtors (NAR).
But what about closing costs? You can opt for the no-closing cost mortgage that raises your interest rate when you keep money in your pocket.
Moreover, you can also have down payment assistance available to help you get the mortgage with no money out of pocket.
Federal, state, and non-profit agencies and even mortgage lenders offer grants and loans to support first-time buyers. Let’s take a look.
1. Homebuyer Down Payment Assistance
Down payment assistance (DPA) can help you buy a home without mediate cash. It includes several federal, state and non-profit programs for first-time home buyers.
Moreover, homebuyer.com gives DPA for buyers to purchase a home with an FHA loan, offering an affordable and user-friendly path to homeownership.
However, buyers have two choices – the 3.5% second loan to cover the down payment and closing costs.
If you’re a middle-income earner or a lower, the second loan has zero interest and no monthly payments. Also, it is a forgivable second mortgage.
2. USDA Loans with No Money Down
USDA loans have no down payment requirements or credit score minimums. It is designed to encourage increased homeownership in rural areas, these loans give subsidized interest rates.
Applicant must prove creditworthiness. Lenders require a credit score of 580 or high to apply.
USDA loan applicants must:
- Be a legal permanent United States resident.
- Prove creditworthiness.
- To maintain a dependable income.
- To have a household income matching 115% of the area’s median income.
- Be the primary residence in the rural area.
USDA mortgages can be used to purchase these property types:
- New Construction
- Existing home
- Condos
- Townhouses
- Manufactured homes
- Short sale or foreclosed homes.
Buyers are responsible for the costs, lender fees and mortgage insurance, though there are opportunities to have numerous expenses covered by the seller or your lender.
3. VA Home Loans with No Down Payment
VA loans provide home-buying options for U.S. military members, veterans, and their spouses. Like the USDA loans, VA loans have no down payment or credit score requirements, though most lenders prefer a credit of score 580 or higher.
Also, you have the certificate of eligibility (COE) to apply for the VA loan. It certifies your service history and current duty status to prove you’re eligible.
VA eligibility requires:
- You served 90 days of active wartime service.
- You served 180 days of active peacetime service.
- You served six years in the National Guard or Reserves.
- You’re the spouse of the service member that died in the line of duty or following the service-related disability.
4. Conventional Loan 97 For First-Time Home Buyers
The Conventional Loan 97 from Fannie allows borrowers to secure a conventional loan mortgage with a 3% down payment.
Moreover, there is personal contribution is not required. Mortgage gifts, grants and other DOA can cover your down payment.
Furthermore, Conventional Loan 97 is an alternative to FHA loans. It has few upfront costs and no permanent mortgage insurance requirements.
Borrowers must meet the criteria to be eligible which include:
- At least one borrower must be a first-time home buyer.
- Mortgages must have a fixed-rate interest.
Also, it can’t be used to buy manufactured homes. Eligible property types include single-family homes to four units, condos, and planned development.
Is It Good to Buy a House With No Money Down
Let’s say are eligible for the no-down-payment loan and get others to pick up the closing costs. Is avoiding putting money down a good idea?
Pros:
● Preserve Your Savings
You can avoid depleting your reserves and keep more cash on hand. Making no down payment means the bank takes the monetary risk and the buyer takes little of the risk.
● Buyer Sooner
Pezon says ” There are housing markets that are still appreciating. Purchasing the house sooner due to a no-down-payment mortgage allows the buyer to participate in the upsides of appreciation and paydown of principal with no money out of pocket.”
● Better Terms
In some cases, government-backed mortgages will offer more competitive or generous terms than a conventional home loan.
Cons:
● Extra Fees
You’ll have to pay a fund fee between 1.4% and 3.6% to secure a VA loan, depending on whether you put any money down and if it’s your first use.
● Little Equity
No down payment, no direct ownership and without ownership, you have no equity in the home.
● Private Mortgage Insurance
You will be responsible for private mortgage insurance (PMI) if you choose a non-government-backed zero-down-payment mortgage.
Conclusion
Your dream to get a house without money can still come true, with the help of mortgages that are available with no money out of pocket.
