Buying your own home is easily one of the biggest accomplishments a person has in their lifetime. Making the dream of homeownership a reality, however, is not always an easy thing to do. If you’re lucky enough to have a job that pays well or generational wealth, coming up with a down payment for your house is a snap.
For others, saving up enough to pay for a down payment feels like an impossibility. Don’t let that keep you from realizing your dream! Read on to learn how to buy real estate with no money down!
Consider Seller Financing
In the world of seller financing, the seller becomes the bank. In these situations, the seller extends a qualified buyer credit in order to purchase the real estate that they are selling.
For example, let’s say you see a duplex for sale that you’d like to live in or use as a source of rental income. Instead of going through the traditional mortgage process, you instead agree on payment terms with the seller of the property.
Different sellers have different ways of handling seller financing, but many are willing to work with buyers who don’t have money to put down to buy real estate but are otherwise well qualified. Paying off what you owe works just like taking out a mortgage, you’ll sign a promissory note and make installment payments until the home is paid off.
Most people who use seller financing only do it for a short period of time. They hope to be able to refinance the property at a later date through a traditional mortgage lender.
USDA Loans
USDA loans are loans offered through the U.S. Department of Agriculture meant to empower low and moderate-income home buyers to buy a home. It is commonly known as a “Rural Housing Loan” because the USDA loan may only be utilized in certain areas. The program offers 100% financing for qualified purchases, and it doesn’t require a down payment.
In order to qualify for a USDA loan, your income must be within a certain range, typically below the median income for the area in which you would like to purchase. You need to verify that the town in which you are shopping for homes falls within the USDA loan area. If you qualify, you’ll enjoy lower-than-average interest rates.
VA Loans
Have you or your spouse served in the military? If so, then you might qualify for a VA loan to purchase your next home.
In order to qualify for a VA loan, you must be a veteran or an active-duty service member, or a surviving spouse. You must not have received a dishonorable discharge. The VA does not require their buyers to have a down payment, and their credit score requirements are much more relaxed than traditional banks.
There’s no limit on the mortgage you receive, except as it pertains to your ability to pay the mortgage. Veterans whose income is below $50,000 per year aren’t going to qualify for a million-dollar home loan.
First-Time Homebuyer Loans
State governments receive income from property taxes paid by homeowners. For this reason, it’s advantageous for states to offer assistance to first-time homebuyers, and many states do!
The State of Texas has a first-time home buyers program available for people who have a 620 credit score or higher. In order to qualify, you must have enough income, but not go above the income limit. People who
Low Down Payment Options
You might not have enough money to put down 20 percent, but there are other loan types that offer potential homebuyers the opportunity to purchase a home with a low down payment. Putting any amount down is an act that demonstrates to lenders that you’re entering into the mortgage in good faith, and makes it easier for you to qualify.
Conventional Loan 97
The Conventional 97 loan program is offered by mortgage giants Fannie Mae and Freddie Mac. This program allows potential homeowners to put down just three perfect of the home’s value when purchasing a home.
There are some caveats to this program, however. First, you cannot take out a loan larger than $548,250. You also may not use the loan to purchase a multi-family dwelling, it is for single-family homes and condos only.
Expect to verify your credit score during the process because the loan is only available to people who have a 620 or higher credit score.
Piggyback Loan
The piggyback loan is a home loan program for homebuyers who have solid credit scores but don’t want to go the traditional mortgage route.
The piggyback loan is actually two loans. Through this process, you bring a 10 percent down payment, get a loan through Fannie Mae or Freddie Mac. Then, you will receive a second loan for 10% of the home’s value to combine with your 10% in cash.
To qualify for a piggyback loan, you’ll need a credit score of at least 680.
The Details on PMI
What happens if you don’t have enough money to put down on a house? You pay PMI! PMI is the acronym for private mortgage insurance.
PMI is a form of insurance that you pay in lieu of putting down a down payment. You then pay PMI until you have paid the equivalent of a certain percentage of the house. It might seem like a hassle to deal with, but it’ll help you get your foot in the door of a home!
Learning How to Buy Real Estate with No Money Down Is Easy!
Everyone thinks you need to have 20 percent of the cost of the house to put down in order to purchase a home. While that might make things easier, it doesn’t mean you have to forego life as a homeowner if you don’t have the cash. Learning how to buy real estate with no money down helps put the power back in your hands.
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