One major step in becoming a homeowner is the down payment. A down payment is a lump sum calculated as a percentage of a mortgage and is conventionally about 20 percent of the total borrowed amount. If you’re looking at a $500,000 mortgage, that’s $100,000 to have on hand, which can be hard to swing for a lot of people. So, what can you do?
Can I buy a house with no money down?
For most, the answer is usually no. However, there are some cases where you can buy a home with no money down. Two ways to do it are through Veterans Affairs (VA) loans and USDA loans. These government-backed mortgages can be difficult to qualify for.
VA loan qualifications
VA loans are veterans assisted loans backed by the U.S. Department of Veterans Affairs. They’re set aside for those who served or currently serve in the military and their partners. These loans can provide zero percent down payment options for those who qualify.
USDA loan qualifications
USDA loans come with competitive rates for primary residences located in designated rural and suburban areas. In addition to location, the borrower must meet specific financial criteria to be eligible. Although Chase doesn’t offer USDA loans, we can help guide you toward a mortgage that works best for your needs.
How do no down payment mortgages work?
A government-backed mortgage means the loan is insured by the federal government. So, if a borrower defaults on payments, the lender knows they may be compensated, at least partially, by the government.
Low down payment options for first-time homebuyers
If you don’t qualify for a VA or USDA loan, there are potential low down payment options like FHA, Fannie Mae and Freddie Mac backed loans. These loans are common for first-time homebuyers because they may require only three percent of the mortgage as a down payment. These types of loans often come with additional requirements, including mortgage insurance, which can increase total mortgage costs.
Homebuyer assistance programs
In addition to low down payment loans, assistance programs and grant options — depending on your personal, financial and geographic qualifications — may also be available. These programs can offer support in the form of down payment and closing costs. Keep in mind these programs vary by state.
Buying a house with no money down is possible but comes with tight restrictions. You may find more availability with a low down payment mortgage and grant options. If you’re a first-time homebuyer, consider speaking with a home lending advisor to find a mortgage that best suits your needs.