09 Dec 2020, Author:

You are tired of living on rent and sending regular checks to your landlord. Buying a house is everyone’s big dream. The only question is how to achieve that dream when you have bad credit? Is it possible to still buy a home with no money down?

Maybe.

Read on to learn more about the possibility of buying a house with no money down.

 

What is the Average Down Payment for Home Property?

According to analytics, the typical average down payment for a house ranges near 20%. However, the exact payment ratio has been fluctuating for the last couple of years. For a first-time house buyer, the average down payment of last year (2019) has been nearly 7%. The average down payment also depends on the financial situation of the buyers. For example, if a buyer has zero credit in their bank account, they will want to opt for a zero-money-down loan.

More importantly, a zero-money down loan is typically followed by a monthly fee. A buyer can effectively evaluate his/her own financial situation and determine what type of loan will meet their needs in the best possible way.

 

What is a No Money Down Payment?

If you are a newbie and unfamiliar with the no down money mortgage, you have to know that this mortgage allows you, as a first-time buyer, to purchase property with extra money. The only money you will have to pay is the standard costs at closing. Other financial options provide you with the necessary funds to manage your financial situation, such as bad credit loans. These loans grant instant access to the required amount to help to pay off debts.

Other loan options, such as the FHA loan, generate down payment options that are as low as 3% down. For a first-time buyer, the variety of loan options can be quite overwhelming. If you are a first-time buyer too, you might be considering whether a no money down payment is right for you.

 

How to Purchase your First House with No Money Down?

Yes, you can buy your first house with no money down. All you need to do is use a loan program that does not use down payment. There are different loan options, such as the VA loan or the USDA and FHA loan programs. The decision of which loan is right for you depends on your eligibility. For instance, the FHA loans can be availed by nearly everyone who fulfills the eligibility criteria. If you opt for VA loans, then you require to have a history of having served in the military. Similarly, the eligibility of a USDA loan requires you to be purchasing your first house in a rural or suburban region of the States.

 

Can you get a House with No Money Down?

Assuming that you have a bad credit score but in dire need of a house, there is good news for you. There are mortgages available where zero down payment is required/ such loans are also known as 100% loans. Usually, these loans are sponsored through programs launched by the government. The 100% loans encourage home-buying while insuring lenders in case the borrower fails to pay the loan. If you are a first-time buyer with little or no credit, you can benefit from 100% mortgage companies.

 

What are the Top Three Programs for 100% Loans?

Following are the top three government 100% loans programs:

VA Loans: these zero money down loans are backed up by the American Department of Veterans Affairs. If you want to qualify for a VA loan, you must be a present or past member of the American military service. If you fall into the category of VA loans, you will receive a shallow mortgage rate. Also, you will not have to pay the monthly fees for mortgage insurance.

USDA Loans: this no-money-down loan is sponsored by the Agriculture Department of the United States. The typical receivers of the USDA loan are those with a low-to-mediocre financial income. Typically, the borrowers cannot pay the expenses of a conventional mortgage and prefer to live in the urban or rural regions of the States.

FHA Loans: you might have guessed it right. The FHA loans are sponsored by the Federal Housing Administration. Similar to the USDA loan, the FHA loan is designed to facilitate borrowers who are having a low-to-mediocre monthly/ annual income. Also, if the buyers have bad credit, they can apply for FHA loans. It doesn’t matter whether you are a first-time buyer or a repeat buyer, you are eligible for an FHA loan and can receive gift funds. The gift funds can cover up to 3.5% of the down payment amount.

 

What are the Benefits of Guarantor Loans?

Apart from those mentioned above, ‘100% Loans’, you can also opt for guarantor loans. Compared to other loans, the interest rates are lower with guarantor loans. These are specifically designed to help the borrower with their difficult financial situation. Even when you have no down payment and a short credit card history, the guarantor loan provides you with the required funds to buy your own house. Also, if you are having difficulty in securing a conventional mortgage, considering a guarantor loan will prove a better option.

Guarantor loans are typically signed by friends or family members with an excellent credit history and property. Although they are not the owner of the property, they take on the responsibility of paying it, in case you go into default. The most significant advantage of guarantor loans is that you don’t need to have a good credit card history to get the funds. The guarantor will take over for you and help you in getting accepted for the required loan. It is still recommended to ensure that you can pay for your monthly fees so that your guarantor can enjoy their peace of mind. Guarantor loans are beneficial to both the borrower and the lender. If you might be unable to return the loan, the guarantor will do it for you.