If you want to know how to buy a house with no money, there are a few things to consider. First, you should know it’s possible to acquire a house with no down payment. There are several programs that can help you with this.
Second, you’ll need a good credit score to qualify for these programs. And third, you’ll need to be able to show that you have the ability to make the monthly payments.
Want to learn more? Keep reading for more tips and strategies.
Get a Loan From a Family Member or Friend
If you don’t want to use HELOC or HECM loans, you may want to consider a family member or friend as your source of financing. This can be a great way to buy a home with no money down.
Of course, you will need to be able to repay the loan, and there may be interest charged. However, this can still be a cheaper option than taking out a mortgage from a bank.
Also, make sure to draw up a contract so that both parties are protected and make your payments on time.
Apply for a Zero Down Mortgage Loan
One of the most common ways to settle down with no money is to get a loan that doesn’t require a down payment. There are two programs available that can help make this happen — the Department of Veterans Affairs (VA) and the Department of Agriculture (USDA).
VA Loans
The VA loan is an excellent option if you’re looking for first-time home buyer loans with zero down payments.
VA loans are available to active-duty service members, reservists, National Guard members, veterans, and certain surviving spouses.
The advantages of a VA loan are the following:
- There is no need to make a down payment
- No minimum credit score requirements (it would be helpful if your credit score is not beyond 620)
- Mortgage rates are lower than market norms
- You are not automatically disqualified if your credit report shows that you have filed for bankruptcy or received certain other types of derogatory credit information
- You don’t need mortgage insurance
- There is no maximum loan amount as long as you meet the other criteria .
One of the reasons VA loans are one of the best no money down home loans is that they allow you to avoid paying mortgage insurance — by paying a one-time funding fee of 2.3% of the loan’s value.
The funding fee for each subsequent use of the loan is 3.6% without a down payment.
USDA Loans
USDA loans are a great option if you’re looking to buy a house with no money down, as they offer 100% financing.
USDA loans also come with some great perks:
- There is no need to make a down payment
- There is no maximum purchase price for houses
- Interest rates are lower than market norms.
If you want to apply for a USDA loan, you must:
- Be a permanent resident of the US
- Demonstrate creditworthiness
- Maintain a steady stream of income
- Have a household income that is equal to or less than 115% of your region’s median income
- Have a residence in a suitable rural area.
The ideal FICO score for your 0 down home loan application must be 640 or higher, and your debt-to-income ratio should not be more than 45%.
You’ll also have to pay lender fees, closing costs, and mortgage insurance. However, the seller or your lender can sometimes pay these fees.
If you don’t qualify for one of the above-mentioned loans, don’t worry — there are other options.
Opt For Low-Money-Down Mortgages
The cheapest way to buy a house is to opt for low-money-down mortgage options, such as FHA, HomeReady, or the Conventional loan 97 program.
FHA Loans
FHA loans are insured by the Federal Housing Administration and can be a great option if you’re looking to buy your first home or have a low credit score (580 or sometimes 500).
To qualify for an FHA loan for a house down payment, your debt-to-income ratio can be no more than 43%. However, ratios up to 56.9% are also acceptable if you have enough income and credit.
FHA loans are pretty flexible when it comes to credit score requirements. Namely, if you have a credit score of 580, your down payment can be as low as 3.5%.
On the other hand, if you have a credit score of 500, you may also qualify for approval. However, you’d have to put down 10% or more.
HomeReady Mortgage
The HomeReady mortgage program from Fannie Mae offers a great 3% low down payment option. To qualify, you’ll need:
- A minimum credit score of 620
- You are not allowed to own any more houses in the country with this mortgage type. Yet, you don’t need to be a first-time home buyer to qualify.
With the HomeReady program, you can buy 1- to 4-unit homes. However, one of the units must be used as your primary residence.
Conventional Loan 97 Program
When it comes to buying a house with no money, the Conventional Loan 97 program (provided by Fannie Mae and Freddie Mac) is one of the best options out there. This 3% down payment plan is frequently cheaper than an FHA loan.
To enroll in the program, you must meet the following requirements:
- The loan amount cannot be more than $647,200.
- You can only get a single-unit dwelling. You can’t get multi-unit dwellings.
- A fixed-rate mortgage is required. Adjustable-rate mortgages are not permitted.
The Conventional 97 plan does not have a specific credit score minimum. It also allows the full 3% down payment to be paid using gifted money as long as the benefactor is related by blood or marriage, domestic partnership, or legal guardianship.
Conclusion
As you can see, buying a house with no money down is not impossible. However, it does take some effort and planning.
If you’re prepared to put in the work, you can find great options that will help you get into your dream home.
FAQ
How hard is it to buy a house with no money?
It’s not as hard as you might think. With a bit of creativity and perseverance, you can find a way to buy your dream home without breaking the bank.
For example, you can look for owner-financed homes or lease-to-own homes. You can also look into government programs that offer assistance for first-time homebuyers.
What credit score is needed to buy a house with no money down?
It depends on the plan you choose. For example, with FHA, you can get a loan with a credit score as low as 580. With the HomeReady Mortgage program, you’ll need a credit score of 620.
Regarding VA and USDA loans, you’ll need to have a minimum credit score of 620 (there is no minimum credit score requirements, but your credit score should not be under 620) and 640, respectively.
For the Conventional 97 plan, there is no specific credit score requirement. However, your lender will most likely want to see good credit history.
Can you buy a house without having money?
Yes, you can. There are a number of programs and options available that allow you to do this, such as VA loans, USDA loans, FHA Loans, HomeReady Mortgage, and Conventional 97 loans.
You can also get a loan from a friend or a family member. However, you should only do this if you’re confident you’ll be able to repay the loan.
Now that you know how to buy a house with no money, choose the option that best suits your needs and get started on the path to homeownership.
