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How to buy a House with no money down

Buying a Home Without a Down Payment

Many potential home buyers are concerned about how much money they need to save for a down payment. However, there are actually a few ways to buy a home without a down payment.

Zero-down mortgages

There are two types of government-backed loans that allow you to buy a home with no down payment:

  • VA loans are available to veterans and active-duty service members.
  • USDA loans are available to borrowers in rural areas.

To qualify for a zero-down mortgage, you will need to meet certain requirements, such as having a good credit score and a steady income. You will also need to pay mortgage insurance, which is an additional cost that helps protect the lender if you default on your loan.

Low-down payment mortgages

If you don’t qualify for a zero-down mortgage, there are still a few options available to you. Some lenders offer conventional loans with a down payment of as little as 3%. You may also be able to get a government-backed FHA loan with a down payment of 3.5%.

Understanding A Zero-Down Payment Mortgage

Zero-Down Mortgages

A zero-down mortgage is a home loan that does not require a down payment. A down payment is the first payment you make towards the purchase of a home, and it is typically calculated as a percentage of the home’s purchase price. For example, if you buy a home for $200,000 and you have a 20% down payment, you would need to bring $40,000 to the table at closing.

Lenders require a down payment because they believe that borrowers who make an upfront investment in their home are less likely to default on their loan. However, there are a few ways to buy a home without a down payment, including through government-backed loans.

Government-Backed Loans

The government offers guaranteed loans to people who need financial assistance when buying a home. These loans are insured by the federal government, which means that the government (along with your lender) will help pay your mortgage if you default. This makes government-backed loans less risky for lenders, and they are therefore more likely to offer them to borrowers with no down payment.

There are two types of government-backed loans that allow you to buy a home without a down payment:

  • VA loans are available to veterans and active-duty service members.
  • USDA loans are available to borrowers in rural areas.

To qualify for a zero-down mortgage, you will need to meet certain requirements, such as having a good credit score and a steady income. You will also need to pay mortgage insurance, which is an additional cost that helps protect the lender if you default on your loan.

Other Options

If you don’t qualify for a zero-down mortgage, there are still a few other options available to you. Some lenders offer conventional loans with a down payment of as little as 3%. You may also be able to get an FHA loan with a down payment of 3.5%.

There are also a number of down payment assistance programs available to help first-time home buyers. These programs can provide you with a grant or loan to help you cover your down payment and closing costs.

Choosing the Right Mortgage

The best way to choose the right mortgage for you will depend on your individual circumstances. It is important to talk to a lender to see what options are available to you and to get pre-approved for a loan before you start looking for a home.

Here are some things to keep in mind when choosing a mortgage:

  • The amount of your down payment will affect your monthly mortgage payments and the amount of mortgage insurance you will have to pay.
  • The interest rate on your mortgage will also affect your monthly payments.
  • You will need to have a good credit score to qualify for the best interest rates.
  • You should also consider the closing costs associated with your mortgage, which can add up to several thousand dollars.

Buying a home without a down payment can be a great option for some people. However, it is important to weigh the pros and cons carefully before making a decision.

Here are some of the pros and cons of zero-down mortgages:

Pros:

  • You can avoid having to save up a large down payment.
  • You may be able to qualify for a mortgage even if you have a low credit score.
  • You may be able to get a lower interest rate on your mortgage than if you had a lower down payment.

Cons:

  • You will have to pay mortgage insurance, which can add to your monthly payments.
  • You may have to meet stricter credit score requirements.
  • You may have to pay closing costs upfront.

Ultimately, the decision of whether or not to get a zero-down mortgage is a personal one. You should weigh the pros and cons carefully and talk to a lender like us to see what options are available to you.

To get started online you can visit: https://tkteam.floify.com/apply-now

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HomeReady Mortgage: Affordability and Flexibility for First-Time Homebuyers

The HomeReady mortgage is a program from Fannie Mae that allows borrowers to put down as little as 3% on a home purchase. This is even lower than the 3.5% down payment requirement for an FHA loan. In it’s design, it helps low-income buyers by placing a limit on how much you can make to qualify, and HomeReady loans allow borrowers to use gifts, grants, or a down payment loan to help cover their upfront costs. co-borrowers are also acceptable, whether they live in the home or not, which makes HomeReady one of the easiest mortgage programs to qualify for.

Some basic requirements to consider:

  1. You cannot earn more than 80% of your Census tract’s median income
  2. You need a FICO score of at least 620 in most cases
  3. The home must be your primary residence
  4. You should have a debt to income ratio (DTI) that’s no higher than 50%. This is more lenient than most other mortgage programs
  5. You must agree to complete a 4-6 hour online homeownership education course

Let’s dig a little deeper below.👇

HomeReady Income limits 2023 💰

Fannie Mae sets the HomeReady income limits nationwide. To qualify, you can’t make more than 80% of your area’s median income (AMI). That means if your area has a median yearly income of $100,000, you must make $80,000 or less to qualify for the HomeReady program. A great tool for anyone to look up income limits for 2023 is Fannie Mae’s AMI Lookup Tool. Simply input your address, and the tool will give you details to your county’s area median income.

Let’s talk Credit 💳

HomeReady depends on the borrower’s credit, and you’d typically need a score of at least 620 to qualify and if your interested in a multi-unit property a 680+ might be needed. Another option to consider if your credit is low is an FHA loan where with a FICO as low as 580, you could potentially borrow with a 3.5% down. Or if you are closer to the 500-579 range you might still qualify, but they’d need a least 10% down payment.

Eligible property types 🏡

You can purchase a traditional single-family home if you want. But, if you want something a little different, Fannie Mae also allows the purchase of:

  • Condominium units
  • Homes in a planned unit development (PUD)
  • Co-ops
  • Manufactured homes
  • Multi-family homes with 2, 3, or 4 units – will require a higher credit score, possibly as high as 680+

Keep in mind different property types have different requirements for documentation and property condition. The specific requirements will vary depending on the lender and the property type so make sure to connect with your lender so they can help you determine the specific requirements for the property type you are interested in. No matter what type of home you buy with HomeReady, it must be your primary residence. This means that if the building has 2-4 units, you must live in one of the units yourself full-time. You cannot use this loan program to purchase investment properties or vacation homes.

Debt to Income Ratio 🔎

What lenders are comparing is your total income to your total monthly debts. for HomeReady is a little more forgiving with it allowing no higher that 50%. To calculate your debt to income ratio

  1. Add up your monthly bills which may include: Monthly rent or house payment, credit cards, car payments, student loans – do not include your bills, like phone, electric, gas ect..
  2. Divide the total by your gross monthly income, which is your income before taxes.
  3. The result is your DTI or debt to income ratio, which will be in the form of a percentage. The lower the DTI, the less risky you are to lenders

Online Home Education Course 📖

HomeReady mortgage borrowers are required to take a homeownership education course.

The course must be taken with a HUD-approved housing counseling agency. The homeownership education course teaches borrowers about the responsibilities of homeownership, such as budgeting, home maintenance, and credit. It also helps borrowers understand the mortgage process and how to avoid foreclosure.

If you would like to learn more about the HomeReady mortgage, you can visit the Fannie Mae website or speak with a mortgage professional like myself to explore your options.

To get started click on Apply Now.