How to Buy a House With No Money Down
If your primary obstacle to home ownership concerns the down payment, you are not alone. For many potential homebuyers, coming up with a down payment of as much as 20 percent seems insurmountable. Do not despair – there is a bright spot. You might qualify for a zero down payment mortgage. How do you buy a house with no money down? There are several options.
Federal Housing Administration Loans
While the majority of FHA loans require a 3.5 percent down payment – still very low – under certain circumstances borrowers may qualify for zero down payment or a token payment of 100 dollars. Those circumstances involve a down payment gift. Such a gift may come from relatives, employers, non-profit organizations or government agencies. A friend may provide the gift as long as you can document a substantial personal history between you.
The U.S. Department of Housing and Urban Development (HUD) oversees FHA mortgages. While lenders are private, FHA guarantees the mortgage.
As long as your credit score is at least 580, you may qualify for a 3.5 percent down payment loan. As long as your credit score is a minimum of 500, you might receive an FHA loan if paying 10 percent down. Federal student loan or income tax delinquency disqualifies borrowers.
If you are a current or former member of the U.S. armed forces, or the surviving spouse of a member, you might qualify for a VA loan with 100 percent financing. Many buyers do not have to pay Private Mortgage Insurance (PMI) even with a no down payment loan, and VA loans offer low interest rates. Closing costs are also reasonable.
While the U.S. Department of Veterans Affairs guarantees the mortgage, it is financed by a private lender. Zero down mortgages are only available to applicants with good credit and sufficient income.
Rural Housing Loans
The U.S. Department of Agriculture offers no down payment loans for very low-to moderate-income applicants in eligible rural areas. Those meeting the income and area criteria may apply for a rural housing loan. Yes, rural housing loans target rural areas, but many of these designations are in or near places usually considered suburban.
The USDA defines very low income as less than 50 percent of the Area Median Income (AMI), while low-income is between 50 and 80 percent of the AMI. Moderate incomes are under 115 percent of the AMI. Maximum income guidelines are strict, so anyone making over 115 percent of the AMI will not qualify.
In general, rural housing loans only apply to dwellings of less than 2,000 square feet. If a new manufactured home is on a permanent site and purchased from an approved dealer, it may qualify for this financing.
Only those with a sufficient credit history may receive these loans, but there is another caveat: They cannot obtain credit elsewhere. An applicant with a minimum credit score of 640 should receive loan approval.
For those applicants whose adjusted annual income is less than 60 percent of the AMI, these loans are structured for repayment over 33 to 38 years.
Zero Down Payment Loans and Bad Credit
Not everyone looking for a home loan possesses a stellar credit rating. Is it possible to purchase a house with no money down if your credit rating leaves something to be desired? That may depend on your future prospects. Some credit unions offer zero down payment mortgage loans to members, but applicants must meet eligibility standards. Pay your bills on time and use other methods, such as SmartCredit, to achieve your future credit score, and you might receive approval.
Programs are available in some states for doctors just out of medical school. These newly minted professionals usually carry a great deal in medical school debt, often more than the price of the average home in an area. If you are a recent medical or dental school graduate, check out Doctor Loan Programs in your region.
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