House Loans Without Down Payments
While it's common knowledge that you don't have to put 20 percent down to buy a house, loans are also available that let you buy a house with nothing down. As of the date of publication, zero-down loans aren't available for every buyer or in every market, but they are an option. In addition, there are ways to have a regular loan work as a zero-down-payment loan.
If you are serving in the military or are a veteran, you may be able to take out a loan with a guarantee from the Department of Veterans Affairs. VA loans carry competitive rates and require no down payments. They also don't require private mortgage insurance. You will, however, have to pay a funding fee, although it can be rolled into your loan amount.
The United States Department of Agriculture also underwrites zero-down-payment loans for properties in rural areas. Its definition of a rural area is relatively broad and can include outlying suburbs of many cities, as well as most of California's wine country. USDA loans are generally aimed at first-time homebuyers, though, and are subject to income limits. They also carry a guarantee fee that can be built into the loan's balance.
As of the date of publication, two large credit unions have started offering zero-down home loan programs. Both have relatively stringent criteria and are available only to members of the credit union. If you can qualify for one of these loans, you can take one out without being subject to private mortgage insurance, income limits or, in some cases, the maximum loan limits other programs impose.
Eliminating Down Payments
If the available zero-down-payment options don't work for you, there are other ways to make a home loan into a zero-down one. You could borrow the money elsewhere, like from an investment account, let it sit in a bank account and then use it as a down payment. Because you're putting borrowed money down, it's effectively a zero-down loan. Alternately, you can set up a piggyback mortgage structure where you use a traditional 80 percent down-payment mortgage and a second mortgage for the remaining 20 percent. You could also have a member of your family buy a portion of the home in an equity sharing arrangement or have the current owner of the house finance you on a zero-down basis.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.