Zero-down mortgage loans make it entirely possible for you to purchase a home with little resources or cash on hand. All you really need to achieve homeownership with a 0% down mortgage is the ability to meet the loan requirements for the program. In fact, several popular no money down mortgage options are readily available today, and a few others are nearly zero down.
No down payment mortgage programs are usually insured by the government, and sometimes come with the quirks or catches of those agencies. For applicants that know a what to look for, these issues are usually minor if anything at all. And if zero down doesn’t work for you, additional low down payment mortgage options and first time home buyer programs exist which can buy a home with 5% down, 3% down or even 1% down. Learn how to buy a house with no down payment through the mortgage programs below.
1. USDA Loans – Available across 97% of America.
Of all the mortgages with no down payment, USDA loans have grown the most in recent years, and for good reasons. USDA loans are generally offered through the United States Department of Agriculture for the purpose of encouraging homeownership in rural areas of the U.S.. As a result, USDA Loans are also known as Rural Development Loans. That doesn’t automatically mean that they’re not an option if you live in a populated area, however. 97% of the land mass in the United States is eligible for USDA loan financing, Rural Housing Loans aren’t just for homes out in the sticks. There are two types of USDA mortgage loans that can be used to buy single-family homes.
- USDA “Guaranteed” Loans are the most popular.
Guaranteed USDA mortgages are the most popular rural development 0% down mortgage option because open the door to homeownership for countless first-time buyer applicants. Single-family USDA rural development loans are available for families with income less than 115 percent of the median area income where the property is located. You don’t even have to be a 1st time home buyer to get a USDA loan, anyone is eligible who meets program guidelines.
- USDA “Direct” Loans are for lower income borrowers.
Direct USDA home loans are offered for applicants with ‘low’ or ‘very low’ income to buy a modest property. Eligible homes must less than 1800 square feet and have a market value that’s below area limitations. The borrower’s household can’t exceed the official low-income limits for the area, which may vary by location and state.
USDA Loan Requirements
USDA loan qualifications are more relaxed than some other mortgage programs like conventional loans. The defining characteristics are that there is no down payment and the property must be in an approved “rural” area, which includes 97% of land in the United States.
USDA Credit Requirements
USDA home loans require a minimum credit score of 640 to be approved through the automated system. Applicants with lower credit scores (600-640) can still be approved through manual underwriting, but it will be more hassle and nothing is guarenteed. See more usda loan credit guidelines.
USDA Income Requirements
Every USDA mortgage program has several income limitations that applicants must adhere to. First, there are the debt-to-income limits that almost every mortgage includes. For USDA loans, the maximum debt to income ratio limits are 29/41. USDA loans also include maximum income limits that applicants may make each year. See more USDA income limits here.
USDA Property Requirements
In order to buy a house with no down payment with a USDA home loan, it must be located in an approved “rural” area of the USA. Luckily, 97% of the American land mass is eligible for financing through USDA loans. You can check USDA eligibility for a property here.
2. VA Loans – For military veterans and their spouses.
VA loans are mortgages with no down payment offered for military veterans and their qualified spouses. The Department of Veterans Affairs estimates that 23 million people are eligible for VA home loans in the U.S., and many of those probably don’t even realize that they’re eligible. Typically, applicants are eligible for a VA loan if they have completed least two years of military experience. VA home loans give qualified veterans and spouses rewarding options for buying a home with no down payment.
VA loans are the most affordable no-money down home loan when the upfront mortgage fees and ongoing costs over the loan duration are factored. VA mortgages are truly “Zero Down” because they allow the seller to pay all of the closing costs for the buyer, leaving nothing due at closing.
VA Loan Requirements
Generally speaking, VA loan requirements march to the beat of a different drum. First off, there are the service requirements which are generally met if the veteran meets at least one of the following:
- 90 consecutive days of active wartime service
- 181 days of active peacetime service
- 6 or more years in Reserves or National Guard
- You’re the spouse of a service member who lost their life serving or from a related disability
If you’ve these initial service requirements, you’re likely eligible to obtain a VA Loan Certificate of Eligibility and can also take note of the additional mortgage-related guidelines.
VA Loan Credit Requirements
Although “official” credit score minimums don’t exist for VA loans, most VA home loan lenders require applicant credit scores to be at least 620. That’s very reasonable in the grand scheme of mortgage criteria.
VA Loan Income Requirements
VA loans don’t utilize the “top/bottom” debt-to-income analysis that most mortgage programs feature. Instead, they use a combination of residual income and a “bottom ratio” of 41%. “Residual Income” for the sake of VA mortgage eligibility is the income an applicant has left over once their mortgage payment (PITI), car payments, credit cards and any other revolving debt is paid.
VA Loan Property Requirements
The Department of Veterans Affairs has issued a set of Minimum Property Requirements, also known as ‘MPR’s’, which outline what home and appraisal guidelines must be meet for VA loan eligibility. These MPR’s mostly address basic issues that could affect the safety, sanitation and structural integrity of the home, as well as its value.
3. Zero down mortgages offered by private lenders
(Check back often for updates)
Beyond the rock-solid government insured mortgages with no down payment, private lenders are once again getting creative in the zero down mortgage game. Here’s the latest scoop:
Fifth-Third 0% Down Mortgage
In 2016, Fifth-Third Mortgage announced their own 0% down payment mortgage for qualified buyers. These home loans without down payment are made possible by coupling Freddie Mac’s “Home Possible Advantage” 3% down payment program with their own down payment assistance program to bridge the gap.
Quicken Loans 1% Down Mortgage
Quicken Loans also started offering the closest thing to mortgages with no down payment in 2016 in their new 1% down mortgage. This program also utilized the conventional Freddie Mac 3% down mortgage program known as Home Possible. From there, Quicken is able to achieve 1% down for the home applicant through a 2% grant.
Guaranteed Rate 1% Down Mortgage
Not to be outdone, Guaranteed Rate Mortgage also began offering 1% down home loans in July of 2016 named “Double Match”. This program works in a similar fashion to Quicken’s 1% loan in that there is a 2% grant to the borrower which is completely forgiveable. These 1% down payment loans are available for borrower with credit scores of 680 or above and can be used for amounts up to $424,100.
Learn all about Low-Down Payment Loans
- USDA Loans
- VA Loans
- 3% Down Mortgages
- 3% Down FHA Loans
- FHA Loan Requirements
- All Low Down Payment Mortgage Programs
- Mortgage Insurance
- PMI Insurance
- Down Payment Assistance
- First Time Home Buyer Programs
- Conventional Loans
- Conventional Loan Requirements
