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Zero down payment loan programs

Zero down payment is a mountain top experience!

With all the costs associated with getting a home, it would be nice to get a break. Well depending on a person’s eligibility, they can obtain a zero down payment mortgage. I know what you might be wondering, what’s the catch? What is boils down to is: Are you a military veteran or do you want to live in a rural area. The two loan programs that guarantee a zero down payment are a VA loan and a USDA loan.

VA loan requirements and benefits

VA loan benefits go as far back as the Serviceman’s Readjustment Act of 1944 which allowed Veterans to obtain a loan guaranteed by the government for purchasing, constructing, or repairing a home. By 1970 the law was adjusted to include mobile homes. Since then more than 20 million VA loans have been guaranteed by the federal government.

You may be eligible for a VA loan if you meet one or more of the following requirements:

  • Served 90 consecutive days of active service during wartime.
  • Served 181 days of active service during peacetime.
  • More than 6 years of service in the National Guard or Reserves.
  • The spouse of a service member who has died in the line of duty or from service-related disability.

Although there are no income limits for a VA loan, a borrower must still have income that can support monthly expenses including the new mortgage. Besides a zero down payment, there are many benefits to a VA loan such as having no mortgage insurance, lower rates, no pre-payment penalties, and limitation on buyer closing costs!

USDA Loan requirements and benefits

A USDA loan is another type of loan that the federal government insures. The purpose of this loan was to help low-income individuals or households purchase homes in rural areas. Funds for these loans can be used to purchase, build, repair, renovate, or relocate a home. USDA Rural Development has a $216 billion portfolio of loans and they plan to administer $38 billion in loans, loan guarantees and grants through the current fiscal year.

This loan requires that the home be purchased in a rural area. The USDA website has a neat tool to determine if an address is eligible for a USDA loan:

Additional requirements including income eligibility may apply and can be verified on the USDA website. along. Eligibility aside, the USDA loan boasts several benefits such as zero down payment, low mortgage rates, and low private mortgage insurance! However, the owner must reside in the property as their primary residence, so investment properties don’t apply.

If you believe you are eligible for one of these loan programs, contact a lender as soon as possible to get more details on eligibility requirements. Although these loan programs have a zero down payment feature, the borrower will still be responsible for closing costs. Therefore, it’s good practice to save up for closing costs and have reserves in place before applying for a mortgage.

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