It’s a common problem: you want to buy a home, but you have no idea how you could ever afford the down payment. Financing a down payment can be difficult, especially if you’re taking the route of getting a conventional home loan. Just do the math. A conventional home loan could require a 10% down payment, and 10% of a $100,000 house is $10,000— no small sum! — so if you’re running on a tight budget and have very little money in savings, then getting a home loan might seem out of the question. And even if you did manage to scrounge up the money for the down payment, you’d still have to deal with the mortgage insurance, the lenders fees and the third party fees. To put it mildly, with a conventional home loan you’re going to need quite a chunk of change upfront. But don’t worry. Because right now there are programs offering home loans for little or no money down. So if you’re short on cash (and most of us are), you should take a look at the programs offered by the USDA, VA, and FHA.
Now let’s talk about each of these in turn.
SECRET #1 TO NO MONEY DOWN HOME LOANS: USDA
One of the greatest secrets of the home buying market is the USDA home loan, which could provide as much as 100% financing. You read that correctly: 100% financing, with zero money down. This program is sponsored by the United States Department of Agriculture and is specifically aimed at “low to moderate income families who want to buy homes in rural areas” (https://www.usdahomeloans.com/no-money-down-home-loans). Now, when you hear the words ‘rural area,’ you might think that suggests a place way out in the country, but not necessarily. Some small towns and even suburbs are qualified by the USDA, too, so it’s definitely worth investigating. These loans are intended to improve the standards of living in less dense areas and can be used to buy a new home, build a home from the ground up, or even renovate a damaged home.
SECRET #2 TO NO MONEY DOWN HOME LOANS: VA
If you’re a military veteran or currently serving in the military, then you probably qualify for a VA loan program. The VA can offer you one at zero money down, which means that you would only have to pay for the VA funding fee and the closing costs. Even better, this VA funding fee can be rolled into the total loan amount, and in some instances the closing costs can be negotiated, too, so you may not have to pay anything upfront through this program.
SECRET #3 TO NO MONEY DOWN HOME LOANS: FHA
If you have a lot of debt and a low credit score, then a mortgage with the Federal Housing Administration might be the way to go. The FHA does require at least 3.5% money down on a new home, but you may be able to secure that 3.5% through a gift fund offered by various organizations or through State or local programs. If you have a high debt-to-income ratio (the amount of money you pay monthly on mortgage, loans, and credit cards as compared to the amount of income you earn each month), or if you have a bad credit rating, then an FHA loan might be the right choice for you.
Buying a home can be scary, especially if you have to deal with a sizable down payment. But with loan programs like the ones offered by the USDA, VA, and FHA, your goal of buying a home may be well within reach. Just remember to consider all of your options carefully and then pick the best program for you.
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