Buying a home is a big investment that can require a substantial amount of money be paid upfront as a down payment– sometimes up to 20% of the cost of the home. Saving for a down payment can be a challenge, and is a major roadblock for many buyers in their homeownership journey.
It doesn’t have to be a barrier, though. There are options available that allow homebuyers to secure a mortgage and purchase a home with no down payment contribution of their own, or a reduced amount, as low as 3%.
Down Payment Assistance Programs:
One way to reduce the amount of down payment you have to save is to use down payment assistance. These programs provide funding, usually in the form of a loan, to be used for a down payment or closing costs when buying a home. Some programs have no monthly payments and are paid back when you sell your house. Other programs have a monthly payment required. Depending on the program you qualify for, and the purchase price of your home, you may not need to contribute any additional down payment of your own.
- Most programs have an income maximum based on a percentage of the Area Median Income
- The maximum loan amount may not cover the full amount of down payment you need
- Some programs can be layered with others to build a larger down payment
- Geographic restrictions may apply
First-time Homebuyer Mortgage Programs:
Many lenders offer mortgage programs that make homeownership more accessible by requiring a lower down payment, as low as 3%. Some of these are limited to people who have never owned a home (or have not owned within the past 3 or 5 years.) Others are available for certain geographic areas. Some programs may allow down payment assistance programs to be used for the 3% contribution.
FHA mortgages are government loans through the Federal Housing Administration. These loans typically require private mortgage insurance (PMI) premiums for the life of the loan if the down payment is less than 10%. FHA loans typically require a minimum 3.5% down payment.
Special Loan Programs:
Veterans Administration loans are backed by the Department of Veterans Affairs and are available to Veterans, active duty military, and surviving spouses. VA Loans don’t require a down payment, and most borrowers who use them go that route. However, putting in as little as 5% can improve the funding cost of the loan.
In order to qualify for a VA Loan, you will need to have a Certificate of Eligibility. These are based on having fulfilled minimum service requirements.
How to Get Started:
So can you buy a home with no money down? The answer is, it depends. The best way to start is by learning what types of down payment programs and mortgage programs you may qualify for.
NeighborWorks Home Partners is a one-stop shop for homeownership, and we are here to help you explore your options. We offer a variety of down payment programs and mortgage products to make homeownership affordable – including conventional, FHA, and VA loans. Fill out our brief form to talk to a member of our team about what programs might be available to you.
About the Author:
I have a passion for housing and I am very excited to get involved in the meaningful work that NeighborWorks Home Partners is doing within the Twin Cities. I am currently a student at the University of St. Thomas studying both Justice and Peace Studies and Sociology. In my free time I enjoy listening to podcasts and cooking with my roommates.