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How to buy a home with no down payment.

How to buy a home with no down payment. With some research and preparation you may be able to buy a home with no down payment but be sure to understand the process. Many programs have a certain order that a first time home buyer is required to follow prior to being able to get the assistance.

Avoid the mistakes, do the research and put yourself in the best position for 100% home financing.

See if there are local grants programs to assist with closing cost and/or down payment.

Many municipalities want you to live in their community. Why? Well, a homeowner takes ownership pride in the property and builds their wealth, which strengthens the community. Not to mention, the government does not mind the property tax it collects from the homeowner. So, the first place to look for closing cost help and assistant to buy a home with no down payment money is the local government. You can search online for grant programs at the local government website, call your real estate agent and see if they know of a program or reach out to first time home buyer and let us try and match you. Grants can be "free money" but they also may be a second lien on the property so be sure to understand the rules and guidelines prior to accepting the assistance.

Many locations offer first time home buyer programs. These may be loans and can require a repayment.

You will likely get a first mortgage home loan from a mortgage lender. That lender may allow for a second mortgage provided by a government or non-profit to be used by you to help with your down payment. These "no down payment" assistance programs truly do vary by location. Depending on the rules some may require a monthly payment and have a term. Others may allow the loan to be forgiven if certain requirements are meet.

It is not just the down payment you may need help with, closing cost assistance may also be needed.

The first mortgage will cover the majority of the money you need to buy the home. The second mortgage/grant/down payment assistance program may cover the remainder of the purchase price of the home. However, there still is closing costs. These can be taxes, fees and service charges. If you are using a program to help you buy a home with no down payment then you will likely also need "seller concessions". Closing cost can be up-to 6% of higher of the sales prices. It really depends on the transaction. Depending o the guidelines of your first mortgage the seller may be allowed to pay up-to 6% of the sales price towards your closing cost.

Example of how to buy a home when you have no down payment:

Home sales price: $200,000.
You decide to finance 96.5% with a maximum % standard FHA home loan = $193,000 loan.
$200,000 (sales price) - $193,000 (loan) = $7,000 is the remaining down payment.
Taxes and Closing cost is an additional 4.5% of sales price = $4,500.
Total needed at closing and for down payment is $11,500.

What do you do?

When you made the offer for the home you thought ahead and decided to request 4.5% seller contribution towards your closing costs and taxes. So, that reduces the total needed from $11,500 back down to $7,000.
If you have found a no down payment assistance program or grant for home buying assistance it may provide the remaining $7,000.

This is how you can structure buying a home with no down payment or little money down. There may also be some Government 100% home loan programs.

There are a couple of Federal programs that will finance 100% of the purchase of a home. That is zero down payment. But be sure to get closing cost assistance from the seller.

The USDA has a 100% home financing program for eligible buyers in eligible areas.

The Veterans Administration offers 100% VA home loan financing for home purchases for eligible buyers.

Avoid these common mistakes first time home buyers make which may prevent them from getting a home with no down payment!

Be sure to know your expected closing costs and taxes prior to making any offer on a home. Have the loan officer or agent tell you what it will cost "in closing". That way when you make your offer you know how much to ask the seller to contribute.
Prior to making ANY offer on a home be sure you know the assistance program you want to use and that you are qualified for the program or grant. Many programs require the borrower to attend a course and get a certificate PRIOR to making an offer on a home .
Understand if your going to buy a home and you are using a program, that will allow to buy it with no money down, that of there is a payment associated with that program the lender includes when computing your mortgage payment. You have to qualify with that additional payment.

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