July 30, 2021

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How To Buy a House and Pay No Money Down

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Saving for a mortgage is a common practice whether or not you have one First time home buyers or a current homeowner looking to buy your next home. But how much money do you need when it closes?

It is possible to buy a home with no money. Read on to see some no down payment home purchase options and some low down payment options when you are ready to buy a home.

No loss of money means 100% financing fin

If you buy a home and don’t pay any money, you’re buying with a 100% funded Mortgage loan. There are some US government sponsored programs with zero down payment options that you should be aware of.

You can qualify for these options if you are a new or repeat homebuyer. You might be surprised that despite the economy, you can’t pay anything at all at the end.

No down payment for home purchases

If you’re not looking to repay your money, there are basically two options for a home loan – the US Department of Agriculture (USDA) home loan and the US Veterans Administration (VA) home loan.

USDA home loan

If you are concerned about your credit score, a USDA household loan might be for you. With mild credit requirements, this zero-down home loan option has been around since 1949. Previously, the USDA loan was known as the Section 502 Mortgage and is often referred to as the Rural Housing Loan.

This US government sponsored rural development loan encourages rural residents to become homeowners so they can help develop their communities. And it doesn’t take much to qualify. You only need the funds to pay your monthly mortgage, but you can’t be too rich either. Your income must be within the range established by the USDA.

In addition to buying a home with no down payment, if you opt for a USDA no cash loan you can also enjoy these benefits:

  • No maximum home purchase price.
  • Add an upfront fee to your loan balance upon completion.
  • Pay mortgage insurance monthly.
  • A loan could include eligible home improvement and repair work.

VA home loan

If you have at least 90 days left in the U.S. military to be on active duty, or if you are a veteran who has served at least two years, you are eligible for the VA home loan with no money. This is the easiest no down payment mortgage loan to get and it is well worth investigating if you qualify for it.

Low down payment for home purchase

Fortunately, it seems to have died out to pay a 20% home loan. Home prices have risen over time, and it’s now easier to buy a home without having to save a lot of money deposit. If for some reason you can’t buy a home without money, there are inexpensive options too.

FHA loans

The Federal Housing Administration insures US government sponsored FHA home loans. With a minimum deposit of 3.5%, this type of home loan is attractive to first-time buyers.

As with the USDA and VA no money home loans, you don’t need a particularly high credit score to get a cheap FHA home loan. Other benefits of FHA home loans include:

  • Paying for mortgage protection insurance or MPI, per month.
  • 10% deposit with a credit rating of at least 500.
  • 3.5% down payment with a credit rating of at least 580.
  • Deposit can be given away.

If you’ve experienced bankruptcy, short sales, or foreclosure, an FHA home loan can help you succeed as a homebuyer on your next opportunity.

Conventional home equity

The US Congress chartered Fannie Mae in 1938 and Freddie Mac in 1970 to provide borrowers with accessible funds and reasonable repayment terms and liquidity to facilitate the housing finance process for banks.

The first time you buy a home, you can choose to pay a 3% down payment at completion when buying a home with a traditional home loan. With this loan, you usually have to pay for a private mortgage insurance, or SMEs.

Pros and cons of buying a home with little or no money

Buying a home with no money can be tricky at times. Here are some pros and cons of the USDA, VA, and FHA home loans. These two entities set guidelines for conventional loans that are not guaranteed or insured by the federal government.

Credit type advantages disadvantage
USDA home loan -Moderate credit requirements
-Seller can pay closing costs
-Can be cheaper than renting
-Can also buy a house in the suburbs
-Must buy within the USDA’s geographic boundaries
-Requires a 2% upfront fee
– $ 29 fee per month for every $ 100,000 borrowed
VA home loan -No monthly mortgage insurance premium (MIP) to be paid
-Seller can pay closing costs
-No minimum credit score required; However, lenders evaluate the applicant’s credit profile
-Must prepay a VA funding fee
FHA home loans -Low minimum credit score
-Can pay an advance premium to the loan account
-Requires annual MIP payment
-Must pay fees in advance

Is Buying A Money-Free Home Right For You?

Some say this is a seller’s market right now. Real estate prices are rising. Demand is high and stocks are low. The silver lining is that mortgage rates are still relatively low, as are the monthly costs of owning a home.

Using these home loans with no cash or low down payment on a home is for you if you:

  • A first homebuyer
  • A veteran
  • A current military service member
  • Living in a rural area

Your home buying needs determine how much you are or are willing to pay on a mortgage loan. Remember, you have options.

Good to know

Many veterans and active duty members are unaware of their eligibility for a VA no money home loan. If you are currently on the duty or are a veteran unsure whether you will qualify for a VA loan or another Veteran’s benefits, check with your local VA office.

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About the author

Kathy Evans is a freelance personal finance writer and entrepreneur with a background in technical writing and educational systems design. She has an MS in technical writing and information design and is currently a PhD student in teaching technology at Towson University. Through work experience in the federal government as well as in the commercial and non-profit industry, she has focused her freelance writing on finance, investment and business content with a specialization in budget coaching.