Buying a home is the American dream! So doesn’t buying one with no money down sound like it’s too good to be true? It’s important to know that if you personally can’t swing a mortgage downpayment, you do have some other options!
So what exactly are they?
Option #1: VA loans (U.S. Department of Veterans affairs)
This type of loan is available for veterans that meet a certain criteria. We understand that you won’t just go join the military to get a home loan but soon-to-be veterans should consider this option when searching!
Here are some key things about VA loans!
1. The loan amount can be equal to 100% of the home’s appraised value
2. It’s possible for the seller to pay up to 6% of the purchase price in closing costs.
3. Not as strict on credit guidelines as some other mortgages.
4. VA home loan guidelines only use one ratio test to determine if the veteran makes enough money to pay for the home. (current debt and expected living expenses)
Option #2 USDA Mortgage (United States Department of Agriculture)
This type of loan will allow borrowers to receive a loan equal to 100% of a home’s appraised value or the selling price. In addition, much like the VA mortgage, sellers are allowed to pay the closing costs of the mortgage up to a maximum of 6% of the loan amount.
Here are some key things about USDA loans!
1.When you use a USDA mortgage, the potential home must be within a zone that has been labeled as rural by the USDA.
2. Most states have multiple areas that are zoned as rural.
3. Larger towns or cities have at least one area that is a rural zone.
Option #3 FHA loans (The Federal Housing Authority)
FHA is similar to VA loans. FHA does NOT offer the loan but rather gives permission to lenders to provide the mortgages according to guidelines. The FHA mortgage has credit guidelines that will also allow the seller to pay closing costs.
Here are some key things about FHA loans!
1. They do require 3.5% of the purchase price to be paid as a down payment.
2. Down payment money does not have to come directly from the borrower.
3. Borrowers can receive a gift from a family member or grant from certain programs.
What does this mean for the buyer who has a 740 credit score but no money available? It means that you can seek out other options to make your dream come true!