Zero-Down Program Basics
It is possible to buy a home without cash if you are a veteran, want to live in a rural area, or are entitled to a mortgage with no down payment.
Saving for a down payment is often the biggest barrier for first-time buyers in the home market. The good news is that you don't have to spend 20% to buy a home.
You can even buy a home with no money if you served in the military, are a rural home buyer, are a member of a credit union, or qualify for 100% financing through certain mortgage lenders. Reimbursement assistance programs can also make it possible to buy a home with very little of your own pocket.
Learn more about non-prepaid mortgages and whether they are right for your situation. Buy Home with Zero down Program
No mortgage payments, no prepayment
There are two state-subsidized loans that allow you to buy a home with no upfront payment.
VA loan
If you or your spouse is a current qualified service member or veteran, you may qualify for a VA loan guaranteed by the Department of Veterans Affairs.
What to expect:
VA loans do not require a minimum down payment or private mortgage insurance, but you will have to pay a financing fee to cover the cost of foreclosure if you default on the loan.
While the VA does not set a minimum credit or income requirement, lenders do. The home must also be your primary residence and meet VA minimum security standards.
USDA Loans
USDA loans are mortgages backed by the United States Department of Agriculture for low- and middle-income purchases in eligible rural areas.
What to expect: While USDA loans do not technically require mortgage insurance, you must pay a security fee that protects the lender in the event of foreclosure.
The USDA does not have a minimum credit requirement, but lenders often require a score of at least 640.
Another 100% deposit
Public loans aren't the only game in town when it comes to home loan defaults.
Some, but not all, lenders offer their own 100% mortgage financing. These loans are not common due to the risk of the lenders. They can lose a lot of money if you default on the mortgage and end up in a foreclosure sale.
What to expect:
Depending on the mortgage lender, they may require that the loan be for your primary home, that you live in a specific area, or that you have an excellent credit score. If your mortgage lender is a credit union, you must be a member.
Advantages and disadvantages of defaulting on home loans
While you may want to win the lottery with a bad loan, there are pros and cons:
PROS
You don't requirement to save that much money.
You can become a homeowner faster.
You have more money in your pocket for upgrades or expenses.
CONS
During the first few years of home ownership, you have little or no equity in your home.
You may have to pay higher mortgage insurance premiums and monthly mortgage payments, interest, or fees.
You may need to bring some more money to pay the closing fee or make a large deposit.
Payment tools
If you don't qualify for a home loan that's not low or low at first, don't despair. There are many state and local homebuyer starter programs that offer help in receiving payment and closing costs.
Final thoughts
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