Buying a Home With Little To No Money Down

Now that the housing market is in recovery, home prices are rising and the glut of available homes is dropping, now might be the perfect time to buy a home while the mortgage rates are still low.

But what if you don't have 20% to put down on a home? Does that mean you have to wait? No, it doesn't, because there are several lending options available that offer low or no money down home loans.

Here are three ways to buy a house with no down payment in 2016.

1. USDA Loan

Most people think USDA loans are reserved for those who are buying rural farmland, but that is not the case. With that being said, there are some geographical limits, but this program is still available to about 97 percent of the continental United States. The USDA Rural Development Guarantee Housing Loan program, formerly known as a Section 502 mortgage, offers no money down home loans. These loans are available to first-time and low-income homebuyers and are backed by the U.S. Department of Agriculture. Additionally, USDA loans generally receive better rates than other no money down mortgages, there are no balloon payments because the loan is fixed and homeowner counseling is not required.  

The other benefits of a USDA loan are that you can include eligible home repairs and other various home improvements in your loan. However, there is a maximum home purchase price, a guarantee fee (which will be added to your mortgage at closing) and you will also be required to pay monthly mortgage insurance as well. However, the USDA no money down home loan option is usually the best low cost option for achieving homeownership if you qualify.

2. VA Loan

A VA loan is also a no money down mortgage program that is available to all members of the United States military and their surviving spouses. A VA loan is originated by a private lender and guaranteed by the U. S. Department of Veteran Affairs. The VA loan qualifications are pretty straight-forward and are as follows:

• Must be active duty or honorably discharged service members.
• Those who have been in the Reserves or National Guard for at least six years.
• Spouses of service members who were killed in the line of duty.

There is a funding fee for first time homebuyers who are not making a down payment. The funding fee required is currently 2.15% for members and veterans of the regular military and is 2.4% for those in the Reserves or National Guard.

3. Navy Federal Credit Union

The Navy Federal Credit Union's no money down home loans are similar to the VA loan program, except for the funding fee. The funding fee for a Navy Federal Credit Union loan is 1.75%. However, they do offer 100% financing to all qualified members, but only for those who are buying primary homes. In order to qualify, you have to be a member of the military or the U.S. Department of Defense and their family. And some civilian employees of the military might qualify as well.

The Bottom Line

If you do not have the criteria required to obtain one of these no money down mortgages, you might consider an 80-10-10 piggyback mortgage if you have good credit. Or perhaps you could look into getting one of the many available low down payment home loans instead.

There are a variety of low down payment home loan options available that require as little as 3% down, not the traditional 20% down many people remember from years ago. However, it's best you don't wait to buy a home. You should consider buying a home now rather than later due to the very real possibility of rising interest rates that are now being considered because of the upturn in the housing market which appears to be in full recovery mode.