So, you’re looking for the right no down payment mortgage option but don’t know where to get started? Let this article be your guide!
What is Zero or No Down Payment Mortgage?
The good news is that you don’t have to put down 20% just to acquire a home. Thanks to the advent of the FHA loan, which arose in 1934.
As the name suggests, zero or no down payment mortgages allows both repeat and first-time home buyers to buy property with no single amount of money required at closing. Many national programs, like those backed by the U.S. Department of Agriculture or Department of Veteran Affairs, offer loans with no down payment to potential home buyers.
Best No Down Payment Mortgage Loans for First Time Buyers
Below, we have listed some of the best loans that first-time buyers can consider without putting on bucks.
- Conventional Loan
Most conventional loans offer down payment gifts from third parties. This is when a person (e.g., family members or parents) contribute money to aid you with the down payment investment you crucially need to meet. Many options are available under a conventional loan.
First off, we have The Home Remedy Mortgage. It requires low money down (3%) and is ideal to both repeat and first-time buyers. People with any income can make use of this loan option. There is also The Home Possible Mortgage that requires 3% down payment. It is a conventional mortgage designed for low to moderate income home buyers.
- VA Loan (100% Financing)
Backed by the U.S. Department of Veteran Affairs, VA loans are a completely zero down payment loan and is available for home purchase if you’re a former or current military member, including some reservists, surviving spouses, and national guardsmen. Aside from being a 100% true loan, VA is also sought-after for providing homeowners with excellent benefits.
It doesn’t require any loan insurance, the loan approvals are more convenient than other types of loans, and most of all, the mortgage prices are the cheapest.
- USDA Loan (100% Financing)
The USDA loan is guaranteed by the U.S. Department of Agriculture and is designed for low- and moderate-income borrowers, whether to rehabilitate, construct, move, or upgrade a primary residence in entitled suburban and rural areas. The income limits vary from state to state.
While USDA loan requires a monthly insurance, the upfront payment, and mortgage premiums are considerably lower than VA and FHA loan. If you are planning to buy a residential property in a big city or a downtown area, then those property types will likely not qualify you for this type of zero down payment mortgage.
- FHA Loan (3.5% Down)
Supported by the Federal Housing Administration (FHA). In most cases, borrowers have required nothing special to apply. While it is not 100% financing, the down payment is low compared to other mortgage options. What’s more, the rates are often below the mortgage rate in the market, and there’s no minimum credit score requirement.
Usually, FHA insures home loans for borrowers with poor credit scores providing they have a realistic explanation for the low FICO. Moreover, it supports homeowners who have recently suffered from foreclosures, bankruptcies, or short sales through the Back to Work program of the agency. You can even take advantage of the down payment gift from a third party.
Is it right for you?
It is no secret that buying a residential property is a difficult yet rewarding venture. Sales continue to go up, supplies cut down, and rates have an upsurge in many neighborhoods and cities. In this case, we can say that a no-downpayment loan is a good option for you since it allows you to purchase a home without money down at competitive loan rates and with a monthly payment you can meet the expense of.
How about those with bad credits?
Another good news, homeowners with poor credit history can take advantage of the no-down payment mortgage option as well. The FHA loan is your main option. You could be eligible for 10% down payment if you have a credit score between 500 and 579. For 580 credit score or above, you can qualify with 3.5% money down. Although, lenders allow 100% of the down payment to be a gift.
Otherwise, your option is to look for down payment assistance programs that might give you permission to purchase a house without money down. As have outlined earlier, VA and USDA loans require zero or no down payment and are willing to qualify those with poor or bad credit scores.