Buying a house with no money down is often done with the assistance of a government-backed loan.
Most people recommend saving up for a 20% down payment on a house, but many Americans struggle with saving up that much while also paying their rent and other expenses. This might lead some to ask the question, “How to buy a house with no money down?”
“There are zero-down mortgages out there that can allow people to buy a home without a downpayment,” says Adam Hamilton, co-founder of REI HUB, an accounting software for rental property owners. “These kinds of mortgages tend to be best for those who have a great income but perhaps haven’t had the opportunity to save up over the years for a downpayment.”
In this piece, we’ll walk you through the process of buying a house with no money down and the benefits and potential downfalls.
How to Buy a House with No Money Down
Buying a house can be a daunting task, especially if you don't have the money for a down payment. But there are ways to purchase a home with no money down and it all starts with understanding the requirements for a no-money-down home purchase.
1. Reevaluate Your Finances
Even if you're looking for a no-down-payment mortgage, you'll still need to have your finances in order to qualify for homeownership. This means having a credit score of at least 620, possibly higher depending on the lender. You also must have a stable income and enough money saved up for closing costs and other expenses associated with buying a home.
“Understand that your payments will be higher with zero-down mortgages,” Hamilton adds.
2. Consider Your New Home Carefully
Another important consideration is the location and condition of the home you want to buy. If you're not looking for a brand new home, you may need to consider a fixer-upper that requires renovations before you can move in. You'll want to work with a real estate agent who can help you find the right home and navigate the purchasing process.
3. Get a Zero-Down Loan
Most zero-down loans come in the form of a government-backed loan, such as a VA loan or USDA loan. A VA loan is insured by the U.S. Department of Veterans Affairs, so you’ll need to be a retired or active-duty servicemember to qualify. A USDA loan is only available for homes in designated rural areas and comes with income limits.
There are some lenders that offer no-down-payment loans that work like a conventional mortgage.
4. Find Payment Assistance Programs
There are state and federal programs designed to help home buyers with closing costs and other fees associated with the homebuying process. Do your research to see if you qualify for these programs, but note many come in the form of low-interest loans, so you’ll need to factor that into your monthly payments.
5. Get the Lender or Seller to Pay Closing Costs
During the closing process, ask the seller or lender if they’d be willing to cover the closing costs. You’ll likely need to repay this in the form of a loan or a higher interest rate, but it could be worth it if it helps you secure your dream home.
The Bottom Line
By exploring various government programs, negotiating with the seller and considering alternative financing options such as lease-to-own agreements or private mortgages, it is possible to purchase a home with little or no money upfront. However, it is essential to do your research and carefully consider the long-term financial implications before making any major decisions.
Why You Should Trust Us
Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his coverage of the New York City economy. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.
For this story, we worked with real estate expert Adam Hamilton, co-founder of REI Hub, an accounting software for rental property owners.
Frequently Asked Questions
What credit score is needed to buy a house with no money down?
Generally speaking, you need a credit score of at least 620 to buy a house with no money down.
How much house can I afford if I make $36,000 a year?
Most people making around $36,000 a year can afford homes that cost $100,000-$110,000.
How do people buy property with no money down?
Buying property with no money down can be done through a government-backed loan or through lenders who don’t require the typical down payment. This can also be done through government programs that help homeowners cover closing costs and other associated fees.
Sources
- Adam Hamilton, co-founder of REI Hub
About Anthony O'Reilly
Anthony O’Reilly is an updates editor for Benzinga. He’s won numerous journalism awards for his coverage of the New York City economy and Long Island school district budgets.
