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Buying Your First Home May Not Be Out of Reach
These days, it seems like there are more barriers than ever between first-time home buyers and their dream homes. One of the most challenging is coming up with a down payment. Conventional wisdom suggests that home ownership might be out of reach for someone who can't put up a down payment on a home – but that might not be the case.
We asked our REALTORS® to share some tips on how to buy a home with no money down. As it turns out, there are several options that could help you become a homeowner without having to come up with a down payment.
Avoiding Down Payment Woes
A recent survey by GOBankingRates.com shows that 69% of Americans have less than $1,000 in savings. Considering that the standard 20% down payment on a $200,000 home is $40,000, it's not hard to see the problem. Even a federally-insured FHA loan requires a down payment of 3.5% (or $7,000 on a $200,000 home). The fact that home prices appear to be on the rise again certainly doesn't help.
No Money Down Loans
To buy a home via the traditional route requires a traditional mortgage, and most mortgage lenders would never dream of offering a loan to a buyer who has not saved up enough for a down payment. That being said, these are the non-traditional options:
- USDA Loans: U.S. Department of Agriculture (USDA) Rural Development Housing loans are available with down payments as low as 0% in many areas. These loans essentially exist to help fill underpopulated parts of the country and are particularly helpful for low-income families looking to buy homes in rural areas, though they are available in many areas that are surprisingly close to major cities. Check the USDA Eligibility page to see if you qualify.
- VA Loans: Dating back to the GI Bill of 1944, the U.S. Department of Veterans Affairs' loan program offers zero down payment home loans that many veterans and military families may qualify for.
- Credit Unions: Many credit unions (nonprofit banking cooperatives) offer mortgages to their members requiring low or no down payments. To qualify, you typically need a very good credit score and an income less than 80% of the median in your area, but it's an option worth looking into.
- Navy Federal Loans: The Navy Federal Credit Union offers qualified members 100% financing. Eligibility is restricted to members of the military and their family members, along with certain civilian employees of the military and U.S. Department of Defense.
Weighing Your Options
Not everyone will qualify for a zero down payment mortgage, but you might be surprised by how many people actually do qualify. It might be just the edge you need to put home ownership within reach.
Of course, it's also good to keep in mind that putting no money down on a home isn't the best option for everyone. If you can make a down payment then you should, if only to have some equity in your home and avoid paying extra for private mortgage insurance. And of course, the more you are able to pay upfront, the less you will have to pay in interest in the long run.
Contact Wagner Realty to learn more about how you can buy a home with no money down. We are committed to helping you find your dream home in the Sarasota/Bradenton area, and are ready to explore all options to make that dream a reality!
