How to Buy Your Home with Zero Down: 4 Mortgage Options

The mortgage process can often present an unexpected detour for many home buyers. Searching for a home is extremely exciting. However, when it comes down to it, buying a home represents a huge financial commitment. So, for those with little-to-no money, coming up with the funds for a down payment of anywhere from fifteen to twenty percent out of pocket can seem inconceivable. Thankfully, there are four ways around this roadblock. Affording a home is all about understanding your mortgage options. This allows you to buy your home with zero down or secure a low-down payment.

Looking to Buy Your Home with Zero Down?

Many home-dreamers are uncertain about purchasing a home simply because they cannot afford a 20 percent down payment. Misunderstandings about down payments like this can often throw the exciting dream of homeownership into a dreary dark cloud, especially among millennials.

A study by the National Association of Realtors found that 80 percent of millennials (ages 18 to 34) said their delay in homeownership was due to being unable to save for a down payment. 69 percent of respondents stated they don’t feel financially secure enough to buy a home, and 63 percent said they aren’t able to qualify for a mortgage because of debt-to-income ratios.

But the reality is, there are mortgage financing options available that do not require a 20 percent down payment. So, before a lack of cash flow causes you to give up on your dream of owning a home, look at the following four mortgage options, which may provide your solution.

4 Mortgage Options to Buy Your Home with Zero Down (or Low-Down) Payments

1. Local and State Homebuyer Programs

Many local counties and states offer homebuyer incentive programs. These are generally designated for first-time homebuyers and subject to buyers by income level. They are aimed to incentivize homeownership by assisting buyers with down payments. Not all programs completely eliminate the need for a down payment. They often offer loans with very little down such as an interest-free loan.

Many programs cater to specific professions such as teachers, first responders and medical personnel. Find a program in your area and see if you qualify for one of these programs at the National Council of State Housing Agencies website.

2. VA Loans

If you are currently or previously employed by the military, chances are that could be approved for a Veteran’s Affairs (VA) loan. Veteran’s Affairs mortgage loans is a 100 percent financing mortgage option and made available to veterans, current members of the military as well as their spouses.

VA loans have been in place since World War II. They offer an opportunity for veterans, military families, and certain members of the National Guard and Reserves to obtain a home loan (without requiring a down payment). It does have a funding fee, called PMI (Private Mortgage Insurance) will can be wrapped into the loan.

To determine qualification for a VA loan, potential homebuyers must first obtain a Certificate of Eligibility (COE).

3. USDA Rural Development Loans

The U.S. Department of Agriculture Rural Development (USDA) mortgage guarantee program offers another mortgage option available to buyers who meet credit and income requirements.

This loan is designed to assist low and moderate income households. Those who may not be able to save for a down payment but can still afford the payments on the loan. In addition, the property must also be located in areas of the country designated as eligible by the United States Department of Agriculture (no, it doesn’t have to be on a farm).

Visit the USDA website for more details and see if you qualify.

4. HomeReady Mortgage

As one of the more recent options available to homebuyers, HomeReady Mortgage can provide lower-income communities with easier access to low down payment mortgages. Backed by the U.S. government, HomeReady offers up to 97% LTV financing for home purchases and refinancing transactions.

To qualify, buyers cannot be an owner of another U.S. residential property. They also must agree to complete an online homeowner counseling course, Framework.

Confidently Buy Your Home with Zero Down

Many people have common misconceptions about securing a home loan without the a down payment; it is actually possible. The trick is to understand what’s available and how you can use it in your unique situation.

Eager to buy a home… but don’t have the finances necessary to afford a down payment? Research these four options and you may find some direction around your financial roadblocks to owning a home.