No down payment mortgage loans
Obtaining a mortgage with no down payment is easier than you think. Obviously sufficient income and credit are a requirement. But perfect credit is not required as sometimes there are options for scores as low as 600. Plus, buyers may even have rent history and a couple other credit references to purchase. Let’s explore these wonderful options that could move you from renting to owning.
USDA No Money Down Mortgage
USDA Rural Development Guaranteed home loans offer 100% financing, while being very flexible in qualifying. In 2016, USDA was able to lower its costs dramatically which made it one of the most affordable home options. As mentioned above, these loans have flexible guidelines. It is even possible for approval with as low as a 620 credit score. USDA is not only available for first time buyers and often proof of prior rent history is not required. Although a prior rent history is always helpful in a buyer qualification.
Contrary to many beliefs, Rural development loans are not just for small homes and very low income families. Actually, the USDA program will lend up to $424,100 in most neighborhoods. In order to use USDA, the property must be located in a USDA eligible area. Luckily most areas in the Southeast US qualify. Check out our step by step guide for searching USDA property eligibility. Also, compare rent vs buying payments using our USDA payment calculator.
VA No Money Down Mortgage
Service members, Veterans, and qualified surviving spouses have the ability to use one of the best loans available. VA home loans offer buyers the ability to purchase a home as a no down payment mortgage. If you are a Veteran, MAKE SURE THAT YOU MENTION IT! We will always ask anyway, but being a Veteran could bring some great home buying advantages. Using a VA home loan for the first time typically allows a buyer to finance 100% of the purchase price. Although there are county VA loan size limits, they are very liberal for a first time buyer.
First time buyers can even include closing costs, prepaids such as 1st year of insurance and escrow set up, or pay off a debt through seller paid concessions. So these are huge advantages for VA borrowers as there is usually no down payment and the seller can pay the costs. Additionally, VA loans are very flexible in calculating deferred or IBR student loan payments. Read a recent article that explains the changes to VA student loan guidelines.
FHA No Money Down Mortgage
Ok FHA is not a no down payment mortgage, but it is only 3.5%. Not 20% like many believe is required for home purchases. Plus the 3.5% down payment may be a documented gift! Therefore, a buyer can purchase a first home with none of their own funds into the transaction. That’s quite an opportunity for first time buyers. Although these benefits could be enough to want to buy, FHA has so many more advantages.
- Seller can pay closing costs
- Down to 600 credit scores
- Higher debt to income ratios allowed
- Co signors are allowed that do not have to live in the home
- Only one year of commission income versus normal 2 year requirement
- Manufactured home purchase
So with all of these benefits, a buyer is much more likely to qualify than not assuming sufficient credit and other qualifications. FHA has long been one of the cornerstone mortgage products for first time buyers and it continues to improve.