The common answer that you will get to this question is "No". However, this answer is wrong. The reality is that it is possible to secure a mortgage with no down payment. Find out more about these home loans, how you can quality for one and whether they are worth it.
USDA Loans
These mortgages with no down payment are available from the US Department of Agriculture. They are designed for low-income families that would like to buy a home in a rural area. There is financing for both traditional family homes and mobile homes. These loans typically come with very low interest in addition to having no down payment.
There are requirements based on the area's median income that applicants have to meet in order to qualify for such loans. The income requirement can range from over 50% to some 120% of the median income. In addition, you have to have a good credit score and good credit history plus acceptable debt-to-income ratio. You can readily check the USDA loan program to find out if you can quality for such a credit facility.
VA Loans
The so called VA mortgage loans available from the US Department of Veteran Affairs are designed especially for army veterans. They offer several perks. There is no down payment. The interest rate is quite affordable. The closing costs are lower compared to those that come with commercially available home loans. The borrower is not charged mortgage insurance premiums.
It is important to note that in order to take advantage of the zero down payment benefit, the purchase price of the property should not exceed its appraised value. This means that it may be more difficult for you to find a house which meets the eligibility criteria. You may want to consider short sales and foreclosed properties.
You can take advantage of this opportunity for financing a house purchase if you meet the eligibility criteria set by the Department of Veteran Affairs. The first step is to obtain Certificate of Eligibility. You need to have a good credit score and exemplary credit history. You must have sufficient income to make the monthly payments. This means that you need fairly high disposable income and debt-to-income ration which is as low as possible.
What to Watch Out for
As you can see, there are various mortgages with no down payment. If you can quality for such a home loan, you have to weigh its pros and cons very carefully in order to make a final decision. It is true that you do not have pay anything in advance so it will be easier for you to secure the credit facility.
However, you will own no equity in your house initially. Similarly, if you pay a chunk of the property price, you can actually secure lower interest and even avoid getting insurance. Basically, you can save money and gain greater financial flexibility if you have savings and put them down as payment for your new home.
In conclusion, if you can take advantage of the mortgages with no down payment, but you have some savings, you should compare carefully these against other options for house financing.
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