If you have little to no money, that does not stop you from being able to purchase a house! Click here to learn how to buy a house with no money.
Are you excited to become a homeowner? As exciting as the adventure feels, some people fall short before they even get started.
The typical millennial homebuyer put down an average of 8.8% of their home’s purchase price in 2018, even though the standard is usually 20%. However, even that amount of money is difficult for some people. If you’re telling yourself, “I can’t afford a house,” don’t worry.
There are options.
Keep reading to discover how to buy a house with no money. These options will help you become a homebuyer, even if you’re afraid you can’t afford it.
It’s time to find your home, sweet home! Get started with these options!
The Zero-Down Mortgage
One of the first options to explore when you want to learn how to buy a house with no money is the zero-down mortgage.
As the name suggests, this is a loan you can acquire without a down payment. Down payments are usually the first payment you make toward your home. It’s usually due when you close on your home loan.
The down payment is often calculated as a percentage of the total borrowed amount.
For example, a $200,000 with a 20% down payment requires $40,000 at closing. Lenders request a down payment because it reduces their risk if you fail to pay your bills on time.
However, down payments are often a major hurdle for homebuyers.
It can sometimes take years to save that amount of cash.
There’s only one way you can get a mortgage with no down payment: a government-backed loan. Insured by the federal government, this type of loan requires the government to foot the bill if you stop paying your mortgage.
The government offers these insured loans to people who need financial assistance. As a result, government-backed loans are less risky for the lender. In fact, lenders often expand their usual loan criteria for people with riskier financial profiles.
That includes borrowers who don’t have a down payment.
There are two types of government-sponsored loans you can apply for: USDA and VA loans. Both will allow you to buy a home without a down payment. However, it’s important to note that each has their own set of criteria you’ll need to meet to qualify.
If you’re asking yourself, “How do people afford houses?” these are the two options to start with.
USDA Loans
USDA loans are backed by the United States Department of Agriculture. The USDA offers these loans to encourage rural and suburban area development. You can get a USDA loan with $0 down if you’re interested in moving into a rural area.
USDA loans also have lower fees than many other types of loans.
In order to discover how to buy a home with no money through a USDA loan, you’ll need to meet this criterion:
- Your home is located in a rural or suburban area (check this map for eligibility)
- The home isn’t a working farm
- Your home is a single-family unit
- You live in this home as your primary residence
There are also a few financial requirements you’ll need to meet. For example, your household’s combined gross income can’t exceed 115% of the median income for the county your home is in.
Your debt-to-income ratio can’t exceed 45%. You also need a minimum FICO® Score of 640.
VA Loans
You can qualify for a VA loan if you’re:
- An active-duty service member
- A member of the National Guard
- A veteran or the spouse of a deceased veteran
VA loans are backed by the Department of Veteran Affairs. If you’re looking for how to get money to buy a house and you meet the criterion above, this is a good place to start.
With a VA loan, you’ll pay a one-time VA funding fee. The fee is 2.15% of your loan value in lieu of mortgage insurance.
You’ll also need to meet these service requirements:
- 90 consecutive days of active service during wartime
- 181 consecutive days of active service during peacetime
- More than six years in the National Guard or Reserves
You can also qualify if you are/were the spouse of a service member who died in the line of duty or from a service-related disability.
You’ll also need a credit score of at least 640 in order to qualify.
Explore this VA Home Loan Benefit list to learn more.
A Low Money Down Mortgage
75% of Americans say buying a home is a priority, even if they can’t afford it.
If you don’t qualify for a USDA or VA loan, that’s okay! There are a few other ways you can discover how to buy a house with no money.
Conventional Loans
Most people think they’ll need a 20% down payment in order to qualify for a conventional loan. However, that isn’t true. You could receive a loan with as little as 3% down, depending on your lending.
This mix-up is based on the private mortgage insurance (PMI) requirement.
Your lender will need you to pay PMI as a condition of your loan. However, this is only necessary when your down payment is less than 20% of the loan amount.
PMI is a type of insurance for the lender. With that in mind, PMI offers no benefits. Most people decide to cancel PMI as soon as possible.
You can cancel your PMI plan as soon as you reach 20% equity in your home.
FHA Loans
You can get a Federal Housing Administration loan for as little as 2.5% down. These loans are ideal for people who have low-to-moderate income. Unlike USDA and VA loans, these loans have fewer requirements.
To apply for these loans, you’ll need to live in the property you’re purchasing as your primary residence. You’ll also need to buy a home that meets livability standards. Make sure to move in within 60 days of closing as well.
If you decide on an FHA loan, you’ll need to pay for mortgage insurance throughout the life of the loan if the down payment is less than 10%.
How to Buy a House with No Money: Your Path to Home, Sweet Home
If you want to learn how to buy a house with no money, start with these options! Using these tips, you’ll pave a path toward your new home in no time!
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