Yes, Some Can Buy a Home With No Money Down

For many months we’ve been hearing how difficult it is to get a loan. According to news reports, the standards have been tightened, you need more money down, you need higher credit scores, etc. etc. etc. Real estate agents across the country say it isn’t hard to find buyers, but it’s darned hard to get those buyers qualified to buy the homes.

But all that is not necessarily true for all people in all places.

It has always been possible for veterans to buy with no money down. And while vets were once required to pay the funding fee up front, current regulations allow for this 2.15% to 3.3% fee to be rolled into the loan amount. The fee varies depending upon the veteran’s service.

Since there is no mortgage insurance on VA loans, this has always been an attractive choice for members of the military.

However, Navy Federal Credit Union may be an even more attractive choice.  Members of military families, and some civilian employees of the military and the U.S. Department of Defense are also eligible, with membership in the credit union.

Navy Federal Credit Union suspended zero down financing following the mortgage crisis, but it has been reinstated this year with the HomeBuyers Choice Mortgage. Their program is similar to the VA’s – but their funding fee is only 1.75%. No Private Mortgage Insurance is required and seller concessions of up to 4% are allowed. This loan is intended primarily for first time buyers and is available for purchases up to $650,000.

The next zero-down opportunity comes from the Department of Agriculture.

Contrary to popular belief, their Rural Development loans are not confined to farmland, or even to borrowers living in rural areas. Indeed, the USDA is granting loans in cities and subdivisions. A quick check of the “eligibility” map on their website indicates that USDA loans are available in the low-income, “depressed” areas in each state.

The USDA program places restrictions on household income, and is intended for first time buyers, although others may qualify. No mortgage insurance is applied, and the 2% loan guarantee fee may be rolled into the loan amount.

This program, which is administered through banks, has become so popular that it ran out of money for a period of time last spring. Until the extension was announced, that situation caused a panic among first time buyers who were hoping to meet the deadline on the tax credit.

Buyers who can’t qualify for “No-down” can look to FHA for “Low-down” mortgages.

During the housing boom only about 3% of all borrowers used FHA loans. Now that number is up to about 30%. Borrowers with FICO scores as low as 580 are eligible to purchase with only 3.5% down. For those with scores under 580, 10% down is required.

FHA loans are, however, the most expensive of the choices. The FHA charges an upfront mortgage insurance premium of 2.25% plus an annual fee of 0.55% of the mortgage amount.

So why are so many still unable to buy a home?

They don’t fall into the right occupational or income categories – or the right geographical categories. They’re self-employed or have recently taken a new job or moved to a new location.

Or perhaps, just because the banks can make these loans doesn’t necessarily mean they will. Under some new Fannie Mae guidelines, an underwriting mistake can now come back on the bank. And banks don’t want to risk their own money.

Author: Mike Clover

One Response to “Yes, Some Can Buy a Home With No Money Down”

  1. Sarah Nicely says:

    I’m a REALTOR in Casper Wyoming, I have had such a hard time getting my buyers financing…many deals have fallen through because of funding. Or lack there of. I have noticed that finding a buyer is much less work than finding them suitable financing. I bring my buyers in to my website, find them a great house in the price range they are needing, now i have an article that i can show them to help support the idea they are not alone in the battle against the bank!

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