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How to Buy a Home With Zero Down

Posted on Monday, Dec 2, 2013

Everyone dreams of owning their home one day. You conjure images of a house that you can decorate and even remodel to fit your style, needs and lifestyle. Life without landlords promises to be liberating, but a check of your savings account balance quickly brings you back to reality. Many renters’ dreams of building equity in property are thwarted by a lack of cash even if they have excellent credit and a stable income. But there are ways to work around this to achieve the pride of home ownership.

Traditional Mortgages

Conventional mortgage loans typically require a down payment of 10 to 20 percent of the value of the house. Other lenders provide multiple mortgage loans, which allow the borrower to take out smaller loans that piggyback on one another to finance 100 percent of the new house. Other mortgage lenders, like Gulf Winds, offer zero down mortgage loans. That means no down payment is needed at closing because we finance 100% of your new home’s value.

Since these zero down loans are high-risk, they usually come with higher interest rates. They may also require a PMI (private mortgage insurance) which protects the lender in case the borrower defaults. The caveat is that borrowers must be able to provide documentation of adequate income to repay the loan and must have good credit. 

Government Assistance

Military families and veterans have been receiving help from the government to purchase homes since World War II. A Veterans Affairs loan, which offers 100% financing to qualified active and retired members of the military service and their unmarried widows requires a certificate of eligibility. The VA funding fee is usually incorporated into the purchase price and added to the monthly mortgage payments.

There are other federal programs that offer assistance for qualified individuals to purchase a home with no down payment. The United States Department of Agriculture offers this incentive to qualified people purchasing and living in homes in rural areas. In another program, law enforcement officers are encouraged to purchase homes in high-crime areas. Local programs exist to target specific neighborhoods in order to spur growth and development. Nearly every state, county and local jurisdiction offers some type of homebuyer incentive program.

Do your Research

Research all of your options. Some programs offer help with down payments, closing costs or a combination of both. There are discounts for first-time homebuyers, as well as particular professions such as teachers or medical professionals. Start with your state’s housing agency and then turn to county and city levels to discover all of the programs available in your area. For federal housing programs, the U.S. Department of Housing and Urban Development (HUD) is a good tool.

Alternative Options

There are other creative ways to eliminate the burden of a down payment. Consider equity sharing. Perhaps you have a family member or friend willing to make an investment. They could give you the funds for a down payment in return for a percentage of the equity in your home.

Down payment assistance programs in the form of gifts or grants are also available from charities. You could quality for help.

Saving enough money for a down payment is often the biggest challenge to homeownership, but now you have some ways to overcome that obstacle. To see if you quality for a Zero Down Mortgage from Gulf Winds, apply for a loan online today.

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