How to Buy a Home with No Money Down

Could a VA home loans or no money down mortgage options be your ticket to buying your first home? If you are like many other prospective homebuyers, you have the income necessary to make monthly mortgage payments, but lack the savings to make a down payment. Fortunately, this does not have to prevent you from buying a home. 

VA home loans and other first time home buyer loans with zero down options can help you buy a home without the need for a down payment. Most zero down mortgages come with special eligibility requirements. These requirements vary by program, however, meaning that while you will may not qualify for some, there is a good chance you will qualify for others. 

Fully reviewing the available programs can give you a strong idea of which programs might be best for you, and where to begin. 

Who qualifies for down payment assistance programs?

No money down mortgages are typically available to two categories of prospective homeowners. These include: 

  • Individuals who have worked, or are working, in public service arenas, and are therefore considered reliable and desirable homeowners. 
  • Homeowners willing to own, and live in, properties in targeted redevelopment or investment areas for at least several years after purchase.

There are preferred public service fields. These include: 

  • United States Military Servicemembers and Veterans.
  • Law enforcement officers.
  • Firefighters. 
  • Emergency Medical Technicians.
  • School teachers (pre-K through 12). 

In addition, first time home buyer loans with zero down typically require recipients to meet certain requirements.  These include being:

  • United States citizens or qualified aliens.
  • Legally capable of signing for loans.
  • In good standing with (e.g. not barred from) federal assistance programs.
  • Holders of good or decent credit histories
  • Willing to purchase homes and properties that meet program criteria. 

In some cases, income eligibility is also a factor. 

It is important to be aware that it is not just you, but also the homes and properties you are considering that need to meet program requirements, in order for you to get these special loans. Keep in mind:

  • Some programs require that properties be located in designated areas, such as urban or rural revitalization districts.
  • Most programs will not provide funding for homes that do not meet basic health, safety and sanitation code requirements. (Exceptions may be made for loans you intend to use to rectify those failings, but you will typically be required to certify that you will upgrade the properties to certain standards, in order to receive no money down funds for such projects.)
  • In general, home buyer loans with zero down are only available for homes and properties being sold at or below their assessed market values. You may not be able to get funding to purchase a home that is being sold for more than its assessed value, even if the higher price reflects legitimate market factors, such as high local demand.

Types of Down Payment Assistance Programs

Repeat and first time home buyer loans with zero down come in several varieties, and are available from diverse sources. There are three, primary programs that all potential homebuyers should look at first, however. Continue below to review the options. 

VA Home Loans

These are available to United States Military Servicemembers, veterans and qualifying surviving military spouses, these loans are provided by private lenders. Participating lenders offer homebuyers special, highly favorable terms on loans to:

  • Purchase homes.
  • Build new homes.
  • Keep, maintain or repair their existing homes. 
  • Renovate their homes. 

Navy federal home loans and other forms of VA loans are partially guaranteed by the VA, which serves to provide lenders the security they would otherwise seek in the form of down payments.
Some restrictions apply under this program. For example:

  • Lenders will only give homebuyers loans for a property’s assessed value. To purchase a house at a cost above that amount, homebuyers must provide the balance of the required funds themselves. 
  • Homebuyers may only purchase homes that meet VA code and safety requirements.

USDA Home Loan Options

These are available to low-income and moderate-income families. USDA loans help homebuyers purchase property in qualifying rural areas. The program guarantees 90 percent of eligible applicants’ loans for the purposes of:

  • Building a home. 
  • Rehabilitating a house. 
  • Improving a property. 
  • Relocating a structure. 

Several critical limits apply. These include:

  • Homes and properties served must be or be made safe and sanitary.
  • Properties must be located within specified rural districts. 
  • Loan recipients must use the properties in question as their primary residences.

The Good Neighbor Next Door Program

Available to public servants including law enforcement officers, firefighters, emergency medical technicians and school teachers, these loans allow recipients to purchase homes at 50 percent of their list prices. The goal of the program is to increase the health and stability of at-risk neighborhoods by increasing the number of stable, socially responsible homeowners in those areas. Under program guidelines:

  • Recipients must use their purchased properties as their primary residences for no less than three years from the date of purchase. 
  • Loans are available for homes in designated revitalization areas, only.
  • Recipients must select homes for purchase from Good Neighbor Next Door Sales listings, only. They have seven days from the date of listing to apply. 
  • Recipients who do not maintain both their employment in an eligible field and their residency at the home for the minimum required period may be required to shoulder the entire market price for the home.  

Qualifying for Multiple Programs

You may qualify for more than one of the above loan programs. For example, if you are a United States Military veteran now working in law enforcement or another qualifying field, you may be eligible for both VA loans and the Good Neighbor Next Door program. In such an event, you will need to seriously consider both your budget and your housing priorities. While you might see a larger financial benefit from the Good Neighbor Next Door program, for instance, you might find that a VA loan allows you to purchase a home in a more convenient or desirable neighborhood for your needs. Be sure to investigate all of your options so that you can make the most informed decisions possible.