How can I buy a home with no money down? This is a question that is asked quite often by many American consumers. There are many programs out there that will allow people to qualify for zero money down home loans. No matter whether you have perfect credit or you have some blemishes on your credit there is a good chance that there is a home loan program for you.
If you are buying an existing home, you have the option of negotiating with the seller to pay your closing costs. Your realtor will negotiate this for you. This may be referred to as seller contribution in your loan documents. Many lenders limit the seller contributions toward closing costs to certain types of fees. Your loan officer and realtor will work together to make sure your purchase contract includes these details.
If you are thinking about buying a home with no money down, you should still have at least two or three months of available liquid assets in the bank or in some form of retirement that can be liquidated quickly such as a 401K. The lenders want to see the funds as reserves so that they know you have money to make the mortgage for the next few months even though you are buying the property with no money down.
While the term "no money down" refers to the down payment on the house there is some money that normally comes out of pocket. This includes your home owner's insurance policy and any earnest money you put down on the house. Both are normally refundable if the deal falls through.
There are many types of programs that allow you to purchase a home with no money down. If you are a veteran you may want to look at taking out a VA loan. You are able to purchase most homes with no cash down, although there is a funding fee that will be rolled into the new loan. The funding fee is a percentage of the loan amount. The percentage you must pay depends on your veterans status, and how many times you have used your VA eligibility. If you are a veteran receiving service connected disability you are always exempt from paying the funding fee, making the VA loan an especially attractive option.
If a seller concession is not available you should consider a 103% loan. This mortgage will allow you to increase your loan amount by 3% of the sales price to help cover closing costs. These programs generally require good credit scores and employment history. Certain lenders may also require cash reserves equal to 2-6 months of payments. The appraisal is usually reviewed very carefully due to the importance of property value when financing over cost.
Borrowers should keep in mind that the interest rate for no money down loans, all other conditions being equal, are always higher than the loans with some money down.