Profile picture for shay5175

I am a first time home buyer with good credit.Is there anyway to purchase without a down payment?

  • February 23 2011 - McHenry
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Answers (16)

Some area in Central Florida allow buyers to use a USDA mortgage loan which requires no down payment.  The property has to be in a "USDA Eligible" area.  These areas are supposed to be mostly rural because this type of a loan was originally intended for farmers but most of the USDA eligible areas in Central Florida are truly suburban nowadays but they are usually not near the city center.
I hope this helps.  USDA Mortgages may be available in your area.
Here is a website that may help you search http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do 
  • March 01 2011
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Profile picture for jstenwick
I'm not sure where you live but in Washington State I can think of two good options for zero-down. The first is the USDA program that Steffnie explained below. I've had several clients purchase homes in rural areas using USDA financing and it's worked well. One caveat is that it often takes more time to get approved and there have been a few instances where the funds have run out. However, they've always been replenished, so just be patient. 

Another program is the State Bond program. This one is specific to first time buyers. You have to take a first time home-buyers class which is a few hours in length. I took it with my client who used State Bond financing and it was an informative and interesting class, even for me, a seasoned agent. There are some income limitations on this program (like USDA and most zero-down programs out there) but if you meet the requirements this can be an outstanding way to get into a home.

Talk to your real estate agent or a friend, family member, or colleague you trust and ask for a referral of a great lender. Any lender worth his/her salt should be able to discuss at least a few zero-down options with you.

Good luck!
  • March 01 2011
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If you live in California and are first time home buyer you can use a new down
payment assistance program and only need 1% for your downpayment.  CalHFA down payment assistance program also provides lower then market interest 30 year fixed interest rates

  • February 28 2011
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Depending on the area that you are looking to buy in there are some down payment asisstance programs available. They can be found in a few collar counties. They require certain maximum incomes and you will have to come up with some money or at the very least have some in the bank after you close.
  • February 28 2011
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Profile picture for Steffnie
Everyone will have a different answer based on the types of loans and what there lenders guidelines are.  I have 100% programs, we all should have at least two.  USDA, which if you are buying a home in the outlined areas and are under the income limit, COULD qualify, or a VA and we all know what we have to do  for that one.  My bank allows for a Gift, which means a family member can "GIVE" you the money.  Not that any of the other answers are wrong, just advice.  Some other lenders have tighter guidelines.  I can't take a manual VA loan if it needs to go manual not enough underwriters for the time it takes to do it.  I have my own underwriter and processor for USDA, another Lender may not or may not be able to even do a USDA.  I would refer you to a Realtor in your area as well to see what programs are available in your city/town, because some city workers are able to get money from an employee program, or bond money that would in turn be a 100% program. FHA doesn't require a credit score either but because of MI or PMI companies which ever one you want to call it today, don't want a faulty loan on there hands with a customer that has a credit score under a specific score.  Mine is 640.  Happy hunting.
  • February 24 2011
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Consumers should beware of non-professionals offering opinions and advice on this website.   There are laws that apply to all of us - not just agents.

Shay5175:  ask your real estate professional to refer you to a few trusted direct lenders who can discuss down payment assistance programs that may be available in your state or locality.   In Georgia we have Georgia Dream and some other programs specific to counties.

Good luck.
  • February 24 2011
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...In today financial climate Shay, most lenders are going to require you to enlist some risk capital into the transaction even if it is a minimal amount 3.5%. This shows your committment to the real estate investment.
  • February 24 2011
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MOST of the answers you received are pretty accurate.  Kudos to HUGD for highlighting some that were not so enlightening.

"Borrow money and sign a contract"?????  Allow me to add to HUGD comment:  Not only is it "not allowed"; but it is absolute fraud.  Both you and loan officer would be subject to legal and criminal repurcussions.  Also, there is usually a buy back clause for the broker/lender.  

"Borrow down payment money" are words never to utter around an ethical mortgage professional.  My career and licensing are not going to be at risk for any loan.

The same truth hold true for an "Angel" co-borrower.  Though this one would not benefit either of you (beyond the fraud).  Once the "Angel" is on the mortgage loan there is no way....short of a refinance or a death certificate....for the "Angel' to ever come off the note.

Ultimately, it bears noting that it is probably good counsel to get your advice from people who are professional experts in their specific field.  I would not provide you with market analysis data on a specific community because it is not my expertise.  Mortgage financing (and the resulting rules, regulations and guidelines) is not a field where "sound bites" and "marketing flyers" can provide the specifics.

Best of luck.  
  • February 24 2011
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Al Says:

"#2. Borrow the $6,000 from close family or friends! Then put a contract together stating how much you will pay them per month, at "x" interest rate over "x" period of time."

Which is not allowed. You cannot borrow funds for a down payment. 
What kind of RE agent tells a borrower to do that?

Also, the clear answer from agents should be, THERE ARE NO 100% MORTGAGES EXCEPT VA!

The HUD $100 down program is on specific homes and $100 down is not $100% financing.
Homepath with 3% down is also on Specific Fannie Mae homes and 97% is also not 100% financing.
FHA requiring 3.5% down is also not 100% financing. 

And my favorite answer...
"Certain banks, like 5/3rd and B of A, do IDHA loans. Walk into one and ask about it or have your Realtor assist you."

Favorite parts are "or have a Realtor assist you." 
That sounds like a wonderful idea. 
And ... IDHA ... I DON'T HAVE ANY

Realtors... raise your hand if you will run to assist the borrower that walked out of his local bank seeking 100% financing and wants to look at 5 houses.
  • February 24 2011
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Certain banks, like 5/3rd and B of A, do IDHA loans. Walk into one and ask about it or have your Realtor assist you.
  • February 24 2011
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Shay,
Everyone has a good answer to your question.  100  percent financing is indeed available with which to purchase a home. 
The thought of asking family or a close relative to provide a "gift letter" and funds to pay the down payment is a good route to consider as well.  If you're more agressive you might search for an "angel" lender: a party who'll participate in the purchase of the home as a co-owner and later agree to a buyout arrangement. 
You may consider a lease purchase arrangement was well , which will provide you time to pay a larger than normal rent payment of which a portion of the rent applies to the purchase price.  Terms including the "rental amount" are negotiated as a condition of the purchase. 
When there's a will, there's a way, keep exploring them and you'll find a way.
  • February 23 2011
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Profile picture for Al McCaw
All the answers from Dan Currie to Christine McGinty are all excellent answers. But I would like to add my own thoughts, if I may.

Instead of looking for a zero down loan, I suggest the following two options:

#1. Save the money yourself! FHA is only 3.5% down. FNMA & HUD are 3%. I don't know where you live, but there are probably shortsales or FNMA or HUD homes selling for less than $100,000. Take 3% of this plus 3% closing costs, that's $6,000. Save up this money! It doesn't matter how long it takes you to save, as long as you do.

#2. Borrow the $6,000 from close family or friends! Then put a contract together stating how much you will pay them per month, at "x" interest rate over "x" period of time.

Get a 2nd job, get a part time job, have your spouse work, sell Amway or insurance, or even do real estate as an agent... whatever it takes, you can do it!
  • February 23 2011
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In addition to USDA and VA loans, there are a few other options to investigate.

FHA still allows 100% of the down-payment to be paid for you as a gift from someone you know well (usually a relative or good friend).

Contrary to previous advice, conventional loans (sold through Fannie Mae or Freddie Mac) only require 5% down if you have the right credit score. Zillow would not allow me to place the hyperlink below (to show you the guidelines as published by Fannie Mae). But the URL is:

https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf

Also, please check to see if you qualify for a grant from your local government agency (assisting home buyers with low to moderate income) to be used as a down-payment with an FHA loan. You can go to the HUD website to get more information about grants. You can speak with a counselor about FHA loans (the URL is below for reference):

http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

Here is another way to reduce your out of pocket expense upon purchasing:

Negotiate for the seller to pay up to 6% of the sales price toward your settlement costs if you get an FHA loan (only 3% can be paid on a conventional loan with only 5% down). And depending how property taxes are paid in your state, a pro-rated tax credit will reduce your out-of-pocket expense at closing.
  • February 23 2011
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You may want to look into a USDA loan.  Technically its a "rural" area loan, but that term can be used loosely as many homes fit within these areas.  For example, I believe many homes in the St Cloud or Harmony area fall into this area.  A good lender with expertise in these loans can give you more information.  And btw, if you get the Seller to contribute to your closing costs you can get in with practically nothing! 

Check out this site for more information:

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

Good luck!

  • February 23 2011
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If you are a veteran you can qualify for a VA loan for zero down, but otherwise those days of no money down are gone! There are special government programs from time to time so check with a few lenders, but you will probably need to start saving some $$.
  • February 23 2011
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Conventional loans will require 10% or 20% down. FHA will require 3.5% down. Talk to a lender as there may be first home buyer programs out there available. Some will grant you the money for your down payment with a minimal amount from you but may require a 5 year commitment on your part or you may have to pay the granted down payment back. Your lender will be able to guide you as to which programs are available and best fits your needs.

  • February 23 2011
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