For many people, owning a home remains a dream. With the current climate, it may be difficult to impossible to put the typical 20 percent down at closing. Today’s blog will showcase that it is possible to get a zero down payment mortgage, so continue reading how and if it’s right for you.
What’s a Zero Down Payment Mortgage?
Getting a mortgage with a zero down payment is precisely how it sounds: a mortgage that requires no money down at closing. It’s an appealing idea that people have considered or even successfully managed. But, not everyone will qualify for this exception since many banks no longer offer them to their customers. It doesn’t mean there aren’t options available.
Buying a Home with No Down Payment
According to Zillow, there are specific qualifying criteria when getting a mortgage loan with no down payment. Veterans are one group that qualifies for this special allowance. The U.S. Department of Veterans Affairs (VA) grants such loans if you have good credit, enough income, and a Certificate of Eligibility from the VA. The benefits include no down payment (as long as the sales price isn’t higher than the home’s appraised value), no private mortgage insurance premium, and limited closing costs.
Another option is getting a USDA loan from the United States Department of Agriculture. These loans include low-interest rates for low-or moderate-income people with decent credit to buy a home in a rural area. The two most common loans are the single-family direct homeownership loan and the single-family guaranteed homeownership loan.
- Single-Family Direct Homeownership — Eligible properties for this type of loan include being 1800 square feet or less with a market value that’s below the applicable low-income limits. Swimming pools or properties designed for income-producing activities are prohibited. Also, the borrower’s adjusted household income should not exceed the applicable low-income limits for the area.
- Single-Family Guaranteed Homeownership — This loan helps those with incomes below 115 percent of the median income for the area by modest homes in rural areas.
If it’s challenging to come up with a down payment, an FHA loan is another alternative. Even though they don’t offer a no-money-down loan, they do allow for loans with a meager down payment (3.5%) of the home’s purchase price Lenders are also restricted in the fees they can charge you.
Pros and Cons of No Down Payment Loans
The pro of getting a no-down payment loan is simple: you can get a mortgage to buy a home without coming up with 20 percent, so those without savings can still get a mortgage. The cons of this option are that you won’t have any equity when you purchase the home, thus no taking out a home equity loan or home equity line of credit for home repairs or other expenses. Furthermore, your mortgage will take longer to pay off than someone who put down money, meaning you’ll be paying the banks thousands more in interest payments.
Need to Sell Quickly?
One way to avoid not having the money for a down payment includes selling your home for cash. With NH Home Buyers, we buy your home outright, whether it needs repairs or not, and with no fees or commissions, you have to come up with. It allows you to have money to purchase a new home and not worry about repair or replacement costs. We serve the Southern NH area and are ready to hear about your property. Contact us today!