Buying a house with no money down is possible for some borrowers that meet certain criteria. For those that don't meet the requirements for a zero down loan program, there are other low down payments options to consider.
Zero down mortgage loans are home loans that allow homebuyers to purchase a property without making any initial down payment. Traditionally, lenders require a down payment to reduce risk, reflecting a borrower’s investment in the property. Zero down loans, however, are designed for potential homeowners who may not have the savings available for a traditional down payment but are otherwise creditworthy.
The most common zero down payment home loans are VA loans, USDA loans and FHA loans with a down payment assistance grant or loan.
The U.S. Department of Veterans Affairs offers VA loans, which are one of the most popular zero down mortgage options available. These loans are exclusive to veterans, active-duty service members, and certain members of the National Guard and Reserves, along with eligible surviving spouses. VA loans do not require a down payment or private mortgage insurance (PMI), and they offer competitive interest rates, making them highly attractive for qualified buyers.
| To Buy a House With a 0 Down VA Loan You Will Need: | |
|---|---|
| Certificate of Eligibility | This certificate is provided through the VA to prove military service and eligibility for a VA loan. |
| Credit Score | VA does not set a specific minimum credit score, but lenders typically look for a credit score of 620 or higher. |
| Debt-to-Income Ratio (DTI) | VA recommends a DTI ratio of 41% or less. Higher ratios may be approved with strong supporting financial credentials. |
| Occupancy | Borrowers must occupy the house as their primary residence. |
Loans from the U.S. Department of Agriculture (USDA) are targeted at buyers in rural areas and allow 100% financing with no down payment required. USDA loans are intended to encourage development in less densely populated parts of the country and are available to buyers who meet certain credit and income criteria.
| To Buy a House with a 0 Down USDA Loan You Will Need: | |
|---|---|
| Location | The property must be located in an eligible rural area as defined by the USDA. |
| Income Limits | Household income typically cannot exceed 115% of the median income of the area. |
| Credit Score | A minimum score of 640 is usually recommended, though lower scores may be considered with additional documentation. |
| DTI Ratio | Typically, the DTI ratio should not exceed 41%, though higher ratios may be permitted with compensating factors. |
The Federal Housing Administration (FHA) loans typically require a 3.5% down payment. However, borrowers can pair these loans with down payment assistance programs to effectively reduce the initial payment to zero. Down payment assistance can come in the form of grants or secondary loans, and eligibility may depend on income or location.
| To Buy a House With a 0 Down FHA Loan You Will Need: | |
|---|---|
| Credit Score | A minimum score of 580 is typically required for maximum financing, while scores between 500 and 579 may be eligible with a 10% down payment. |
| DTI Ratio | The maximum DTI ratio can go up to 57%. |
| Down Payment Assistance | Eligibility for assistance varies by program but often includes income limits and may require homebuyer education courses. |
| Mortgage Insurance | Borrowers must pay upfront and monthly mortgage insurance premiums. |
| Occupancy | Borrowers must occupy the house as their primary residence. |
In addition to 0 down mortgage options, there are several other loan programs that have low down payment options.
These programs are conventional loan options from Fannie Mae and Freddie Mac that require only a 3% down payment. They are aimed at helping more first-time homebuyers and low-to-moderate-income individuals purchase homes.
HomeReady: Offered by Fannie Mae, HomeReady targets creditworthy low-income borrowers. It requires just 3% down and offers flexible funding options, such as allowing contributions from extended family members to count towards income qualifications.
Home Possible: This program by Freddie Mac also requires a 3% down payment and is similar in purpose to HomeReady. It offers various options to assist diverse buyer needs, including low income families.
HomeOne: Another Freddie Mac program, HomeOne, is aimed primarily at first time home buyers without the income restrictions that apply to Home Possible and HomeReady, providing wider accessibility.
| To Buy a House With a 3% Down Loan You Will Need: | |
|---|---|
| Credit Score | Minimum credit scores can vary but are typically need at least a 620 credit score. |
| DTI Ratio | Generally allow a DTI ratio up to 50% with strong credit and other compensating factors. |
| First-Time Homebuyers | For Home One, at least one borrower must be a first time homebuyer. |
| Income Limits | HomeReady and Home Possible have income limits, usually 80% of the area median income (AMI), while HomeOne does not. |
| Occupancy | Borrowers must occupy the house as their primary residence. |
Although less common, some lenders offer mortgage programs that require just a 1% down payment from the buyer. These programs often involve the lender contributing 2% towards the down payment, enabling a 3% equity at closing. However, these loans can be restrictive and come with specific eligibility requirements, including credit score minimums and income limits.
| To Buy a House With a 1% Down Loan You Will Need: | |
|---|---|
| Credit Score | Typically a minimum of 700 is required. |
| Income Limits | There may be income limits depending on the specific program and the location of the property. |
| Contributions | The lender typically contributes 2% of the down payment, which helps the buyer achieve 3% equity at closing. |
| Occupancy | Borrowers must occupy the house as their primary residence. |
FHA loans are popular among homebuyers due to their lower down payment requirements and more lenient credit standards compared to conventional loans. Typically, FHA loans require a down payment of 3.5% if the borrower has a credit score of 580 or higher.
| To Buy a House With a 3.5% Down FHA Loan You Will Need: | |
|---|---|
| Credit Score | A minimum score of 580 is required to put 3.5% down, while scores between 500 and 579 may be eligible with a 10% down payment. |
| DTI Ratio | VThe maximum DTI ratio can go up to 57%. |
| Mortgage Insurance | Borrowers must pay upfront and monthly mortgage insurance premiums. |
| Occupancy | Borrowers must occupy the house as their primary residence. |
Zero down and low down payment mortgage options are designed to make homeownership more accessible to a broader range of people. These programs cater to different demographics and financial situations, and potential homebuyers should evaluate each option to find the best fit for their needs, while also seeking advice from financial and mortgage experts. Alpine Mortgage offers zero down and low down payment loans in the following states; California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Texas.
Contact us today at (800) 876-5626 to learn more about our zero down loan options or click here to have one of our zero down loan specialists contact you.
If you would like to apply for a zero down home loan, you can apply online now.
The credit score required for a zero down mortgage can vary by loan type and lender. For VA loans, lenders typically look for a credit score of at least 620, although it's possible to qualify with a lower score with compensating factors such as a high credit score or low DTI.
If you don't qualify for a zero down mortgage, you can consider other low down payment options with a gift from a family member for your down payment. Most low down payment programs allow a gift for all of the dowwn payment.
