$0 Down Mortgages – Yes – They Exist!
Some homebuyers have the income to pay the monthly mortgage but lack the money for a down payment.
Or, there are mortgage programs designed for a certain homebuyer and a $0 Down Mortgage is available.
Here are all the $0 mortgage options:
Veterans or Active Military: VA Mortgages are always $0 down. Key points:
- Available for veterans, active military, reserves or surviving spouse;
- A 500 Credit Score qualifies – 560 is preferable;
- A retired vet needs a DD214 (honorable discharge) and Certificate of Eligibility;
- The seller can pay for all your closing costs – up to 6% of the purchase price; and,
- Some believe the VA has to provide an approval: not so, the mortgage is approved and funded directly by a lender, just as other loans.
USDA: stands for United States Department of Agriculture and is $0 Down.
Originally, designed for rural families or housing with moderate income. Or, homes in the country, far away from the city. Today, with urban sprawl, you can get a USDA mortgage close to work or other city life. Key points:
- Down Payment: 0% down payment;
- Closing Costs: up to 6% can be paid the seller;
- Credit Score: Minimum 580;
- There are Income Limitations: your total family income must be under $82,700;
- The location of the home determines if it will be a USDA loan; and,
- The home can be a regular sale, short sale, foreclosure or bank-owned home single family, townhome or approved condo.
If you are in the Gulf Coast, large swabs of properties east of I75 are USDA eligible as are huge parts of Palmetto and Ellenton and north of Tampa. Most of central Florida are eligible. One has to go outside the main thoroughfares of the large urban areas, Jacksonville, Orlando, and Miami, to find homes.
HUD $100 Down Homes are almost $0 down. Here, the house foreclosed, meaning the prior owner could not make payments and lost the home. Because HUD issues insurance on FHA mortgages, HUD becomes the owner. To make the house attractive for sale, it offers it for a down payment of $100. As an added incentive, HUD often covers 2% of your closing costs.
HUD Homes are available in every county in Florida and in all types of neighborhoods, from urban to rural to waterside and more. Many confuse HUD homes with HUD Housing also called Section 8. Section 8 is an apartment complex rental also owned by HUD and serves our low-income neighbors.
Most homes require some repairs as they have been abandoned. HUD does a property inspection before putting the house for sale, and if repairs are required, HUD places a repair escrow, meaning money to fix the property. You can also renovate the house with an FHA Rehab loan. Such as a new kitchen, or plumbing, or roof. Because it is a HUD HOME, you still only have to pay $100.
The downside is you have to search longer to find one and you need to constantly search as the availability of homes varies. Not all HUD homes are listed all the time or in one place. HUS has a website that lists many of them. The downside is you have to search longer to find one and you need to constantly search as the availability of homes varies. The plus, you can get a $300,000 home for under $1,000. Key points:
- Mostly single family homes;
- You need to place a $1,000 as a deposit on the contract;
- The loan is an FHA mortgage;
- The minimum credit score is 580;
- HUD Homes range from $50,000 to $315,000; and,
- No income limits.
FHA $0 Down – this is a lender specific program available to only High Credit Worthy Homebuyers. The lender “gifts” you 3.5% down as a 2nd mortgage. Few individuals qualify here. Key points:
- Credit score of 640;
- Need a 100% Perfect Credit History, with no charge-offs, or bankruptcies, or repos, or missed payments;
- Ideal for First Time Home Buyers with income over $50,000;
- Rates depend on credit score and size of loan;
- Minimum of $150,000 to the maximum of $299,000.
- You still have closing costs which can be paid by you or the sellers– this average @4.5% of the purchase price.
Here, if your credit is great, as long as you or the seller can cover the closing costs of @4.5%, this is an excellent choice.
SHIP or State Housing Initiative Program – Florida provides grants to local counties to encourage home ownership with grants up to $15,000.This is a state program, administered by the local county housing authority. Technically, you have a down payment, but the county gives you the money Key points:
- You must be very low, low or moderate total family income;
- Have to attend a homeownership class and get a certificate;
- Total household income needs to be under @$63,000;
- The county (where the property is located) needs to have money available;
- Limits on the price of home usually in the $200, 000 range;
- Problem is that not more than 20% of the grants can be made to households with moderate income, @$45,000. And, counties will designate certain areas, or type of housings, such as renovating an urban area;
- Different counties place their own restrictions, such as a 640 credit score or limit your debt to income to 41%, whereas FHA allows up to 56%;
- Less than 10% of folks that apply get it, my guess is less than 1%. I have had 12 customers apply for it, and only 1 got the grant at the end.
Getting $0 Down Mortgage is a bit harder, but saving thousands of dollars makes it worth the time.
Contact me to see if you qualify.
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Chris Luis, Mortgage Broker, www.ChrisLuis.com