Can you buy a house if you have no money? Yes! It is possible.
While buying a house, people go for a mortgage, where they pay a certain part of the overall cost of the house as down payment. The remaining cost is paid every month as a monthly mortgage. Initially, a down payment of 20% may have to be paid. This means if you want to buy a house that costs $100,000 you have to pay $20,000 upfront and then you can pay a small mortgage amount monthly for a long period of up to 25 or 30 years.
But if you don’t have money to pay the initial down payment, what do you? Don’t worry if this is the case. There are stills ways you can buy the home without paying any down payment or at least paying a very small amount[i].
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The United States Department of Agriculture (USDA) offers loans with zero down payment. This is meant for low-income families. However, the home you buy should be in a rural area. This doesn’t mean you have to buy in a farm area. Land outside cities is considered rural. You have a good chance of getting a zero down payment loan, for a home a little outside the city.
If you are an army veteran, then VA loan programs are available with zero down payment. Usually, they may insist on a credit score of at least 620. But there are private lenders who would offer VA loans even if you have a lesser credit score. This is a very good option for veterans to own a home if they have no money for the down payment.
The Navy Federal Credit Union offers its members a 100% financing loan, where there is no down payment to be made. If you meet the requirements, you can even get a loan of up to $1 million under this loan program.
3% down payment[iii]
There are loan schemes that offer a mortgage with a down payment of just 3%. Yes! You need to pay just 3% of the home value as initial payment and can then make small monthly payments later. This is thanks to loans offered by private companies Fannie Mae and Freddie Mac. But there are some riders – you may need to have a credit score of a minimum 660. You may also need to pay six months mortgage in advance and your mortgage payment cannot be more than 45% of your gross income.
If you do not have a high credit score don’t worry, there are relaxed requirements offered by the FHA (Federal Housing Administration). With a credit score of 580 and above, you can buy a house with a down payment of just 3.5%. If your credit score is between 500-579, you can still buy the house you wanted, but the down payment would be 10%.
Use gift funds
There are options whereby you can get even the initial 3% down payment amount as a gift from someone, could be relatives or friends. This would be considered as gift funds. So, if someone is ready to help you, then you can buy a home without paying anything upfront.
If you have no money to pay upfront to buy a home, there is no reason to worry. There are programs, which allow you to buy a home with no upfront payment or a payment, as low as 3%.