A Couple of No-Down Financing Options
Typically, when you buy a home you must have some sort of down payment. When you use a FHA loan (which usually requires the smallest down payment) you will need to have a down payment of 3.5 percent of the amount you offer on the property. There are less known options available to homebuyers that will allow you to get into a home without having to have any down payment at all.
The first option to look at is an USDA loan. USDA loans will give you 102% of the appraised value of the home, which will cover your closing costs. This loan will be a 30-year fixed rate loan, with an interest rate based on what the market is currently at. You will need to have a 640 minimum credit score unless you have been through a short sale, then you will need a 660 credit score. The draw back with this type of loan is that it is only available for specific areas, which are mostly rural communities. There are income limits as well, which means if you make over a certain amount of money you will not qualify. This loan is only for a personal home that you plan on living in, but most existing single-family homes and new construction single-family homes will qualify. Some condominiums and modular homes will qualify for this loan as well. It will work for both first time homeowners and those that would like to move to a different home. To find out more about this type of loan and to see if you qualify you will need to call mortgage lenders in your area and ask them if they do USDA loans and what the qualifications are.
There are also local banks and credit unions you can work with where you can get into a property without a lot of money out of pocket. To find these banks, start calling local banks and ask to speak to their mortgage department. Ask them if they have a low cost, or no down payment option loan to get into a home. There are a lot of options for first time homebuyers in this area. My son went through this experience last year. He found a bank with a no down payment option and got prequalified (Getting pre-qualified is a must to know how much they will loan you to buy a home). As he went through the process, he had to pay for the appraisal out of pocket which was around $500. He chose to pay for a professional inspection on the property about $250-$350. At closing he had to bring in $200-$300 for some closing costs. All in all, he got into a $150,000 home for around $1,000 out of pocket, of which $250 was optional.
Lending rules have relaxed a little so there are now options to get into a home with little out of pocket money. If you want to buy a home and you do not have a lot of money saved up, consider these options, as there may be a way to get you into a home.