How to Buy Real Estate with No Money Down
Real estate Q&A: “How to buy real estate with no money down?”
It used to be easy to buy real estate without putting a penny down, but after the real estate boom turned to bust, most of those options slipped away.
However, there are still a few programs out there that offer 100% financing, sort of…
USDA Zero Down Loan Program
One of the few remaining zero down loan programs comes from the United States Department of Agriculture (USDA).
While it is reserved primarily for low-income individuals and households, you can have an income up to 115% of the median for the area.
The property must be “modest in size, design, and cost,” and borrowers must have “reasonable credit histories.”
In other words, it’s easy to get approved for a zero down mortgage from the USDA, assuming the property is located in a rural area, or at least an exurb.
The loans are typically 30-year fixed mortgages, and private mortgage insurance can be avoided thanks to a guarantee fee (which can also be financed).
Contact a loan officer or mortgage broker for more information on the program.
HomePath® by Fannie Mae
Government mortgage financier Fannie Mae also has a program called HomePath® that offers financing with down payments as low as 3%.
The kicker is that the down payment can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer.
In other words, zero down financing…and you can avoid paying mortgage insurance.
It used to be possible to get an FHA loan with zero down thanks to seller-paid downpayment assistance, but now you need to put down 3.5%.
You also have to pay both an upfront mortgage insurance premium and an annual mortgage insurance premium.
While it’s not 100% financing, it’s pretty close and not a bad deal, considering most conventional lenders these days want 10% down.
So there it is – if you take the time to shop around you may be able to get that property you have your eyes on without breaking the bank.
Read more: How much should I put down on a house?