How Do You Get a Mortgage with Little to No Down Payment?

Many Americans find it hard to afford a mortgage.

Many of the young adults decide to move back to their parent’s homes because they think that a house is something that’s way beyond budget. Some struggle with their finances because of the burden they are carrying, called student loans. Other lack enough money in the form of savings.

Down payment? Forget it. They don’t even want to waste money on rent. For this reason, sleeping on the couch in their parent’s house looks like the next best move.

What they do not know is that there are so many ways to afford a house with little to no down payments. If you are one of them, then this day must be your lucky day.

Here is a rundown of home financing programs that offer little to no down payments:

FHA Loan

First on the list is the FHA loan. This federal home financing program won’t be popular for no reason at all. It does not only have more relaxed requirements compared to conventional loans, it also offers as low as 3.5 percent down payment.

Forget about the 20 percent downpayment conventional lenders offer you. 3.5 percent of the purchase price is good enough for you to finance your home purchase.

While the 3.5 percent down is still down payment per se, it does not necessarily have to come from your own pocket. If you can source it out in the form of a gift from your parents, or a non-repayable grant from a charitable organization, you can use this money as a down payment.

What you have to make sure is that the money does not come from a loan and that you can prove this claim.

USDA Loan

If you are planning to purchase a house within an eligible rural area, you may take advantage of a USDA loan. Just like the FHA loan, this financing program as more lenient requirements than many conventional loans.

If you are worried that you are not making enough for your income to qualify for a loan, you need not worry. Your income mas also not exceed the maximum qualifying income that the USDA has set.

The USDA loan is essentially created to give low- to moderate-income homebuyers an opportunity to access credit needed for homeownership.

The USDA offers zero down payment. To qualify, you will have to have a credit score of 620. However, if you shop for lenders you may chance upon those who allow no down payment for a credit score of 580.

In addition to the credit requirement, you must also have a debt-to-income ratio of 29 percent.

VA Loan

The VA loan is designed for military and veterans. Those who qualify may take a loan with zero down payment.

The VA loan has flexible qualifying guidelines. As long as you are entitled to this benefit, there is a very slim chance for you not to qualify.

Like the USDA loan, a credit score of 620 is needed, although there are some lenders who go as low as 580. There should also be enough residual income left on the applicant’s paycheck after certain deductibles are deducted.

These are just three options which do not require the 20 percent down payment. If you are still searching for other possible options, never hesitate to talk to a variety of lenders. In fact, it will be helpful to talk to two or three different lenders for you to compare their offers.

Once you find the right loan, it will only be a few more months before you move from your parent’s house to your own home.