One of the things that we need to worry about when buying a home is to ensure we have enough money to shell out for a down payment. Fortunately, one can purchase a home without money down, thanks to a zero-down mortgage home loan. As mentioned earlier, a down payment is usually the first payment a homebuyer makes to buy a home and is due when you close on a home loan. To get your down payment, lenders will calculate your down payment with the total amount you borrow.
The reason lenders require a down payment is because it reduces the risk that you won't pay your bills, but truth be told, down payment can be a significant challenge to first-time homebuyers. Why? Because it can take up to years until you could save up for that lump sum of cash. However, you should know that you have options. If you want to get a mortgage with no down payment, government-backed loans can help you with that. These loans are insured by the federal government, meaning you'll have to deal with the government should you stop paying your monthly dues. Besides the no-money-down feature, government-backed loans are also less risky for mortgage lenders since they can expand their loan criteria to people who hold riskier profiles, such as people who have loans with no down payment.
The Two Types of Government-Sponsored Loans
When it comes to government-backed loans, there are two types you could choose from that offer no down payment: USDA loans and VA loans. However, each type of loan will have a set of specific criteria that you need to meet to be eligible for the zero-down mortgage. If you don't meet the USDA loan or VA loan qualifications, you may need to get a conventional mortgage or government-backed FHA loan. But still, these options can give you a low down payment option.
The USDA Loan
The United States Department of Agriculture backs a USDA loan. Additionally, the government offers USDA construction loans and other loans to encourage housing and development in rural and suburban areas. Thankfully, you can get a USDA loan with $0 down and has lower fees than other types of loans.
To get a USDA loan, you need to meet a few criteria:
- Your home must be in a suburban or rural area. Checking the USDA's map for qualified areas may help;
- Your home can't be a working farm and should be used for residence;
- You'll need to have a combined gross income that can't be more than 115% of the median income of the county you choose;
- Your debt-to-income shouldn't be higher than 45%;
- You should have a FICO® Score of at about 640;
The VA Loan
One can qualify for a VA loan if they are an active-duty service member, a veteran, a spouse of a deceased veteran, or a member of the National Guard. VA loans are backed by the Department of Veteran Affairs and offer zero-down loans to help you buy your dream home. With a VA loan, you can pay a one-time VA funding fee that's about 2.15% of your loan's value in place of mortgage insurance.
Of course, it's much better to speak to a mortgage lender to understand whether you qualify for this loan or not. But either way, here are some of the requirements you should know, and you must meet one of the following:
- You have served 90 consecutive days of active service during wartime;
- You have served 181 consecutive days of active service during peacetime;
- You have served more than six years in the Reserves or National Guard;
- You are the spouse of a service member who has a service-related disability or who died in the line of duty;
The Bottom Line: There Are Options You Can Take to Buy a Home Without the Down Payment
Earlier, we said that one of the headaches of homebuyers is coming up with the lump sum of cash for the downpayment for their mortgage loan. Fortunately, there are government-backed loans that you can choose from so you can say goodbye to down payments and start paying for your home. Shannon Christenot quoted "Ideally, you'll want to work with a mortgage lender who has experience with USDA loans and VA loans to ensure that you qualify, have a smooth mortgage process and that you get to have your dream home."
How Can Shannon Christenot Help You?
If you're looking for a mortgage broker in Los Angeles, you've come to the right place. Shannon Christenot is a mortgage broker with licenses from NMLS and BRE. For over two decades, She has been helping clients with their home purchases and refinance needs. Let's get you your dream home today! Call us at (818) 601-2231.