5 Different Ways To Purchase a Home With Little Or No Money Down
Many people believe buying a home is a dream that is far from reach either because they have no money or not enough saved. I am here to tell you that; only your credit history and score should delay your Dream of Homeownership. It’s easier to get a mortgage if your credit is good, but you can still get a mortgage with a credit score as low as 580. I am only knowledgeable on this subject because in the past as a Mortgage Loan Officer; I’ve helped many homeowners with no money down. I’ve also pre-approved and closed loans for clients with credit scores as low as 580. There are different mortgage products available to accommodate most people seeking a home loan. Here are a few ways to approach your homeownership goal with little or no money.
1st Approach: Down Payment Assistance Programs
There are grants, different types of loans and incentives offered by either the State Housing Authorities, Cities and or Counties, Non-profits organizations and sometimes your employer may have programs you’re unaware of. You and sometimes the home you are buying must qualify for the down payment assistance – some eligibility requirements are the completion of a homebuyer education course (most are available online), the home’s sales price, income, and housing payment history (can’t have any 30 days late rent or mortgage payment in the most recent 12 months)
2nd Approach: VA Home Loan
For military personnel (Active duty, Reservist, National Guard and Veterans) who qualify, the Veterans Administration (VA) home loan is an excellent way to purchase a home especially for those that are exempt from paying the funding fee. VA only sets the rules and guidelines for the VA loan program. They then give banks and mortgage lenders the ability to issue VA loans. Don’t go calling VA to get a VA mortgage, call the lender that is authorized to issue VA loans. VA loan is unlike most home loan programs because you can finance 100% of the purchase price, meaning zero money down. Plus, the seller can give the buyer up to 6% of the purchase price to pay closing costs.
3rd Approach: USDA Home Loan
Yes, the United States Department of Agriculture (USDA) has a home loan program. You might be pleasantly surprised when you see some of the areas that are considered rural; therefore, eligible for a USDA home loan. Like most home loan programs, there are specific guidelines and eligibility requirements for a USDA mortgage. Your income and property must both qualify. Your mortgage lender can determine your income eligibility. With a USDA mortgage, you can also finance up to 100% of the purchase price or the appraised value. The appraised value and purchase price are typically the same, but in the case where those two are not the same, the 100% financing is based on the lower of the two.
4th Approach: Retirement Funds
Most retirement accounts will allow you to withdrawal funds; without a penalty to buy a home. Please consult your investment bank or asset manager about your specific retirement account. Make sure to let them know; the withdrawal will be used to purchase a home.
5th Approach: Low Down Payment Programs
Let’s say the first four approaches are not an option because you have a little bit of many saved and your income is over the qualifying limit. If your credit is not very good and you have 3.5% of the purchase price for a down payment; the Federal Housing Authority (FHA) mortgage would be your go-to option. FHA is less strict on credit requirements. If you have good credit (700 or higher) and you have 3% of the purchase price for the down payment; the conventional mortgage is your best bet. Both Fannie Mae and Freddie Mac now have programs that only require 3% down (Home Ready and Home possible). Other ways to reduce your out of pocket expense is to ask your mortgage lender/ bank for a lender credit or ask the seller for closing cost credit also called seller concession.