2020-06-05
Buy a Home with No Money Down

No Money Down

Remember the days when zero down payment loans were everywhere and every lender across the country was hawking them from their websites and in late-night infomercials? Anybody with a pulse could buy a home with very little money out of pocket.

We all know how that turned out and, in the end lenders put the brakes on their generosity.

Zero-down loans still exist, however, and the most popular among them is the VA and the USDA loans. Only military veterans and current members and some spouses qualify for the former, so let’s take a look at the USDA, a loan you might just qualify for.

What the USDA Offers

Depending on income, a borrower can qualify for a loan guarantee made to a lender (much like the FHA-backed loan), or a direct loan made by the USDA.

Both of the programs have income limitations and the home must be located in a rural area, which the USDA defines as “open country or rural towns” with a population of no more than 20,000. You cannot own another home if it is within 50 miles of the home you wish to purchase.

Qualifications

Here are the basic qualification requirements for the USDA Direct Loan:

  • The borrower must have a low to very low income.
  • The borrower must be without adequate housing and must be able to afford house payments, including insurance and taxes.
  • Applicants must prove that they tried to get a conventional loan but were denied credit.
  • Applicants must have a “reasonable” credit history.
  • Applicants must be U.S. citizens or a legally admitted immigrant.

Just as the borrower must pass muster for the loan, so must the home that he or she wishes to purchase. The house must be modest for the area in size, design and price (swimming pools are prohibited). There are additional requirements that your lender can fill you in on.

The qualification guidelines for the Guaranteed Loan are similar to the Direct Loan except that your income may be a bit higher and you must use a USDA-approved lender.

While there are several low-down payment loan programs on the market, the USDA’s zero down requirement is a boon for homebuyers with decent credit, low income and no cash reserves for a down payment.

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