How to Buy a House With No Money Down

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Malcolm-Wiley Floyd


Apr 3, 2023

CEO and Co-Founder of Stairs Financial, a YC-backed startup that connects first-time home buyers with down payment assistance programs across the US. Malcolm-Wiley studied economics at Harvard and is a licensed mortgage broker.

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    Buying a house is no small feat. It can require a significant amount of money, time, and effort to achieve. But what if it was easier? What if we told you how to buy a house with no money down? 

    We promise there are no tricks. 

    There are actually a number of programs designed to help first-time buyers purchase a home with little or no money down. You just have to know where to look. 

    In this guide, we talk about the three ways to buy a house with no money down: grants, loans, and lender credits. We also go over other options such as matched savings programs and home loans with low up-front costs. 

    So buckle up, because you’re about to find out how to buy a house with no money of your own, and you’ll want to pay attention.

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      Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.

      Can you buy a house with no money down?

      Yes, you can absolutely buy a house with no money down if you qualify for down payment assistance programs in your area. There are grants, deferred or forgivable loans, and lender credits that help you get into a home with no money upfront. 

      A lot of these programs can be combined, so talk to your lender or let Stairs help you find a lender who is familiar with down payment assistance programs.

      How to buy a house with no money down: Three options

      Buying a house is hard under any circumstances. You would think buying a house with no money down would be harder. Surprisingly, there are three relatively easy ways to achieve this: grants, loans, and lender credits. 

      We know about many tools that can help you on your homeownership journey, but let’s go over 3 no money down ways: grants, loans, and tax credits.

      1. Grants

      A down payment grant is a financial award you receive at the time of closing. The money can be put towards down payment and closing costs. 

      Grants can be an effective tool to boost the amount of down payment and speed up your home purchase timeline. Each grant will have different requirements based on who is offering the program. These are offered by:

      • Government organizations
      • Nonprofits
      • Mortgage lenders

      A down payment grant is similar to a needs-based scholarship for college. You apply, and if you qualify for the program, you receive funds toward your down payment or other closing costs. 

      As long as you follow any guidelines (like living in the home for a certain number of years) you don’t have to pay any of the money back. 

      2. Loans

      Down payment and deferred-payment loans are another way to buy a house with no money. When it comes to these loans, there are several options.

      Down payment or second mortgage loans

      A down payment loan or second mortgage loan is an additional loan on top of a mortgage loan. You get these in order to have the money for a down payment.

       Many traditional home loans require a 3%-20% minimum down payment in order to access them. If you don’t have this money saved, then a down payment loan is an option to help you qualify. These programs are typically available through the same lender you’ll use for your primary mortgage. 

      This type of assistance is a simultaneous loan in addition to your primary or first mortgage, meaning you’ll be responsible for two payments each month, one for each loan.  

      Often, down payment loans have a lower interest rate compared to your traditional mortgage loan. They sometimes also have more flexible repayment terms, and they can be easier to access if you have a lower income. 

      Deferred-payment loans

      Deferred-payment loans are similar to second mortgage loans in that you take out a loan to cover the costs for your down payment. The main difference is that with a deferred payment loan, you don’t start paying the money back right away. The repayment happens when you eventually sell your home. 

      Lenders expect the repayment of these loans to come from the equity you earn in the home over time, through long-term repayment and home price appreciation.

      These loans are originated by the same lender you use for your home purchase. Many, but not all, of these loans charge 0% interest. 

      Forgivable loans

      Forgivable loans are down payment assistance loans or second mortgage loans but with a forgiveness contingency. You take out a loan to cover the costs of your down payment, and then your loan is forgiven as long as you stay in the home for a certain length of time. 

      Each forgivable loan has its own requirements, but on average you’re expected to stay in the home for between 5-10 years. (Every loan is different and some require up to 20 years.) 

      If you need to move from that home before the forgiveness term is up, you’ll be required to repay the loan plus any interest that may be charged for breaching the contingency clause.

      These programs are offered by certain participating lenders. Usually, you’ll use this same lender to finance your original home loan. 

      3. Lender Credits

      Lender credits can be used as down payment assistance or to cover other closing costs related to buying your home.

      Lenders have established income limits, credit score minimums, and loan limits you must meet in order to qualify for a lender credit. Often, these credits will come as cash contributions towards your home purchase.

       Lenders are the ones creating these programs, so you’ll have to find one that offers this kind of down payment assistance.

      In the case of lender credits, closing costs typically need to come from your cash reserves. But if you’re short on cash, you can roll the closing costs into your existing mortgage loan. 

      In order to do this, lenders will charge a slightly higher interest rate (.25%-3%) to compensate for taking on those fees for you. You won’t need the immediate money down, but you’ll be paying interest over the life of your loan until you refinance or sell.

      First-time homebuyer loans with zero down

      Buying a house as a first-time home buyer is possible, even if you have zero money to put down. The reason for this is because of down payment assistance programs focused on helping first time buyers become homeowners. 

      There are a lot of different types of loans you can use, but we want to cover two specific types because they’re a little different.

      USDA Loans

      USDA home loans are provided by the United States Department of Agriculture. They are specifically for rural areas. 

      On the USDA website, you can find an address verification search tool. This is imperative because the USDA loans are location specific, meaning they aren’t available for buyers in every zip code of the state in which you live.

      VA Loans

      VA Home Loans are specific for Veterans of the Armed Forces. If you qualify for a VA-backed home loan Certificate of Eligibility, you can qualify for one of these loans. Additionally, you will need to meet your traditional lender requirements as well as primary residency requirements. 

      These loans waive the PMI (private mortgage insurance) requirement and allow for no down payment and lower-than-average interest rates.

      Home loans with low up-front costs

      There are a lot of options when it comes to buying your house with little to no money down. If you have some money to contribute to your down payment but still need help, one of the following loan options might be a good fit for you. 

      Not sure which down payment assistance option is best for you? Stairs helps you compare all your choices.

      3% Down Conventional Loans

      These loans offer a low down payment of only 3% for borrowers who qualify. They have more flexible credit and income requirements compared to other conventional loans and are a great option for many buyers. It is also the most-used loan type in the U.S.

      Home Possible Loans by Freddie Mac

      This program is designed to help low to moderate-income borrowers purchase a home with a down payment as low as 3%. Borrowers can also use gift funds or grants for their down payment and closing costs, which helps many buyers qualify more easily. 

      HomeReady Loans by Fannie Mae

      Similar to Home Possible, this program offers low down payment options, but with additional benefits such as lower mortgage insurance costs and more flexible income requirements.

      FHA Loans 

      Backed by the Federal Housing Administration, these loans are popular among first-time homebuyers due to their low down payment requirement of 3.5%. They also have more lenient credit score requirements. 

      Conventional 97 Loans 

      This loan program option allows borrowers to put just 3% down on their home purchase while still receiving the benefits of a conventional mortgage. It’s a good option for those who don’t qualify for FHA loans but still need a low down payment option.

      Matched savings programs: The long game for down payment assistance

      When it comes to buying a home, sometimes you have to wait a bit longer. Fortunately, there are programs available to make it easier for you, like a matched savings program. 

      A matched savings program works with a sponsor to help you save up for your down payment. Future homebuyers are encouraged to save into a designated savings account for their inevitable home purchase. 

      You contribute to this savings account for a pre-designated period of time. At the end of that period, your savings account balance will be matched by the down payment assistance sponsor — essentially doubling your original investment. 

      This program helps lower wage earners or households with fewer resources access greater down payment savings in a reduced time frame and with a greater contribution. Just like most down payment assistance programs, there are additional requirements to qualify. 

      Learn more: What can you afford on your current salary? Find out how much house you can afford if you make $70,000 a year.

      No money down for your house? Find out which assistance programs you qualify for

      Down payment assistance programs are everywhere. There are over 2000+  programs that are accessible, and finding one that fits your circumstances is possible. 

      Search online, look at the press, visit your local HUD office (that’s Housing of Urban Development), talk with mortgage lenders, and reach out to mortgage brokers. Your real estate agent might know some, and of course, you can get in touch with us at Stairs Financial.

      Stairs connects you to qualified lenders who work with all the down payment assistance programs you might qualify for, then lets you compare your options side-by-side.

      With Stairs, you can easily find out exactly which assistance programs are available to you, so you can make a more informed decision.

      Learn more.

      Find up to $15,000 towards a home 🏠

      Compare local down payment assistance and find a mortgage, fast.

      Where do you want to buy?
        Search by ZIP code, address, city, county, or neighborhood
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