If you're like most people who are just beginning to explore the possibility of making their first home purchase, you're probably understandably skeptical when you see vague online claims that it's possible to buy a house with no down payment. Because these are sometimes teasers designed to get you talking to a real estate agent or private seller, a certain amount of caution is completely understandable. However, there are actually are opportunities for consumers to purchase property without having to put down an out-of-pocket down payment. The following are three of them.
USDA loans are available for those with low or moderate incomes who have credit scores of 580 and above. These loans are aimed at prospective homeowners in rural and suburban locations. Applicants must meet U.S. residency requirements, meet specific income limits, and be planning on occupying the home as their primary residence. Because these loans typically require no down payment and have lenient credit requirements, they're an excellent option for those who wouldn't be able to qualify for a conventional real estate loan. Those seeking a USDA loan must work with a qualified USDA lender, so be sure to ask your real estate agent to recommend one if you are interested in going this route. As an added bonus, USDA loans generally come with better than average interest rates, and sellers are allowed to assume a certain amount of the closing costs in these loans.
Although FHA loans generally require a down payment of 3.5%, there's one important difference between these types of loans and conventional loans. Although many conventional loans only require 3.5% down as well, they put limits on how much of the down payment can come in the form of gifts or grants. For instance, if your parents are willing to gift you 100% of the down payment, or if you find a down payment grant program that's willing to do the same, you won't be approved for a conventional loan; these lenders want you to contribute a certain amount of your own money because they feel that doing so shows that you're committed to being financially responsible.
Like USDA loans, VA loans require no down payment, and sellers are allowed to pay the buyer's closing costs as long as they are 4% or less of the total home price. You may also be able to get lender credits for closing cost assistance. Be sure to ask your agent about closing cost options if you're going to be financing your home purchase with a VA loan.
Contact a company like VA Loan Lending for more information.