Coming up with a down payment and mortgage closing costs can be a difficult thing for many prospective homeowners. The good-ole-days of zero-down mortgage loans with no closing costs and everything rolled into the loan are gone. These days, you might usually expect to pay between 3% and 20% percent for a mortgage down payment, depending on the value of the home you wish to buy. Fortunately, there are still some ways to lower the down payment percentage below 3% to 2, 1, and in some instances, 0% down home loans.
Zero-Down Mortgage Options
If you’re looking to pay nothing up front for your home, there’s two primary options offered by the federal government to consider first. If you happen to be a veteran, reservist, or active duty service member you may be eligible for a VA loan, although eligibility can vary so it is best to consult their website.
Another increasingly popular choice among first-time homebuyers is the United States Department of Agriculture’s Rural Development loan. This loan program is aimed at providing homeownership opportunities for low- and moderate-income individuals. The loans can also provide funding for vital home improvements.
Although the program was originally created to help farmers, it has been broadened in scope over the years to apply to entire rural communities. The loan is backed by the U.S. government, and can be applied for as much as 100% of the appraised value of the property, which means no down payment. These loans also don’t require mortgage insurance, which can end up being a pricey aspect of a private loan.
As good as this deal may sound there are restrictions to it, and the eligibility process is two-fold. In order to be approved for a USDA Rural Development Loan both the buyer and the property must qualify.
Property eligibility
In order for a property to be eligible it must be in a rural area. This means that the population of the area you want to live in must be less than 20,000 people. Initially, this requirement may seem drastically limiting to your career prospects. However, there are many areas deemed eligible by the USDA within commuting distance from major cities.
For example, if you work in San Francisco, California, you may think this program can’t possibly offer anything promising nearby. But just an hour north of the city, in the town of Windsor, your property would be eligible for a zero-down mortgage. If homeownership is your dream, a bit of an extra commute may an acceptable price to pay.
There are numerous eligible regions within an acceptable commuting distance from a major city. The USDA provides a map that highlights such areas. If you already have a property in mind enter the address to see if it’s eligible.
Buyer eligibility
The second requirement to accessing a USDA Rural Development Loan is income. Since this is so heavily reliant on your own personal situation, it is advisable to use the income eligibility calculator on their website to learn more.
For first-time homebuyers, a USDA Rural Development Loan is a great option to consider if you do have the ability to make monthly mortgage payments, but a home is still out of your reach due to the required down payment. Furthermore, it doesn’t mean you must live in the middle of nowhere. Americans of all career types and living preferences may well find a community in which to call home, with the help of a USDA loan.
