Buying a Home without a Down Payment

By Marianne Salina
Loan Page Columnist

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If you are a prospective homebuyer with good credit but can't finance that huge down payment on your mortgage, you may consider a no-down-payment loan. Often people with good credit will prefer to use their money for home equity purposes, such as furniture for their new home instead of a down payment.

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A no-down-payment mortgage means that you are financing 100% of the home. Mortgage brokers created this type of loan in response to how, historically, property values will rise after purchase, allowing you to create home equity.

Is a No-Down-Payment Mortgage for You?

There are a few people who opt for no down payment loans: people who can only buy a home if there isn't a down payment and people who choose to invest in home equity. If you are a first-time homebuyer, you may not have saved up the required amount that mortgage brokers are asking, and if you have good credit, the no-down option may work for you.

There are a few requirements for securing a no-down-payment mortgage:
  • Minimum 700 credit score
  • You must occupy the property for which you're receiving the mortgage
  • You must have 3% in cash for the transaction for closing costs
  • Total monthly debt to income ratio cannot exceed 41%
  • Maximum loan is $300,700
It is important to meet with several mortgage brokers to determine what your needs are and how your budget, credit, and income factor into an agreement.

Sources:

Understanding No Down Payment Mortgages, Home Purchase Center, Quicken Loans Zero Down Mortgage

About the Author

Marianne Salina is a freelance writer and columnist in Spokane, Washington. She graduated with honors upon receiving her B.A. in Literature/Creative Writing from UC Santa Cruz.

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