Key Takeaways
- It is entirely possible to buy a house with 0 down payment; you just need to shop around and see which options are available to you.
- Buying rental property with no money down is the same as buying a house; you need to weigh your options and determine what you qualify for.
- A zero down payment mortgage allows you to keep more of your savings, but it also means higher loan payments in the future.
For homebuyers and investors alike, a zero down property represents an appealing opportunity. Luckily, there are several avenues available to make this a reality. Sound too good to be true? I must admit, zero down payment properties do not present themselves everyday. However, it doesn’t mean that buying a house or rental property with zero money down is impossible. Keep reading to find out which options may be available to you.
What Is A Zero Down Payment Mortgage?
When it comes to buying a home with zero money down, most people are referring to a zero down payment mortgage. This type of mortgage requires no money down at the time of closing. The purpose of zero down payment mortgages is that they can enable individuals to purchase a property without a large upfront cost.
There are several options available for those attempting to consider buying a property with no money down. For example, qualifying veterans are able to apply for a Veterans Affairs mortgage, more commonly known as a VA loan. As their name suggests, VA loans are reserved for military veterans. More importantly, they require zero percent down and often do not require monthly mortgage insurance. They are also easier to qualify for than conventional loans.
Another route for buying a property with no money down is through loans provided by the U.S. Department of Agriculture. USDA loans were created to spur rural development and are available to low or moderate income families looking to put zero down. It is worth noting that only certain areas are available for consideration, and there is an eligibility map to determine if your property will qualify.
One of the most popular options for a zero down payment mortgage is through an FHA loan, although there is a slight catch: FHA loans do require a 3.5 percent down payment, but the down payment does not necessarily have to come directly from you; it can be a non-profit or financial gift. FHA loans are available on one to four unit properties, making them a great option for investors looking to avoid a large down payment.
[ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]
Can I Buy A Home With Zero Down?
The availability of the above options may vary, as they are dependent on your circumstances ranging from financial to geographic. That being said, it is a great idea to conduct some research and figure out what you may qualify for before ruling anything out. When it comes to investing, you want to make sure you understand every option before moving forward.
First, and perhaps most obvious, VA loans offer unique opportunities to those who have served in the military. These loans are dependent on 90 days of active service if you are currently serving or two years of service if you are former military service. There are also specific rules to determine if you may qualify as the spouse of a veteran. If you meet these qualifications, and are considering purchasing a home be sure to determine whether or not you are eligible for a VA loan.
Similarly to VA loans, there are some cut and dry requirements to USDA loans. USDA loans also may only be used to finance an owner-occupied primary residence, meaning this may not be an option for investors looking to buy a rental property with zero down.
When it comes to FHA loans, you can move forward with this option if you are looking for more flexible credit requirements but are still able to put some money down. FHA loans are perfect for first time home buyers who may not have a large amount of savings or a strong credit history, but still want to achieve their dreams of home ownership.
For those wondering how to buy rental property with no money down, the circumstances are similar. As an investor, you need to weigh your financial situation and determine whether or not you qualify for one of the above options. It is entirely possible for investors to move forward with a deal with zero down, you just need to know what’s out there.
Pros And Cons Of Buying A Home With No Down Payment
With any financing option, there are pros and cons. Your success in buying a house or buying rental properties with no money down will depend entirely on your situation. There are several factors you can consider as an overview when weighing this decision.
Pros
There are several positive factors associated with purchasing a home with zero money down, especially for buyers concerned with a down payment.
- No money down means more money in your bank account. One of the biggest fears buyers have when purchasing a property is using all of their cash reserves on a down payment. This could leave you less equipped to handle unexpected or surprise costs should anything come up while you replenish your savings. Putting no money down means you go straight into making mortgage payments incrementally, and at your own speed.
- A zero down payment can allow buyers to keep their savings for emergencies, but it can also enable those without savings to purchase property. Buying a house with zero down can allow those with low savings accounts an opportunity to achieve their goals of homeownership.
- Another pro associated with putting zero down is that in some situations, a large down payment may not even secure better mortgage rates. What I mean by this is, every situation is different. Often homebuyers are concerned with getting the best mortgage rates; however, before draining your savings on a hefty down payment make sure you check how and if it will affect your mortgage rates moving forward.
Cons
A perfect financing option does not exist, and with anything there are some cons you will want to consider before jumping in. These are a few things to look out for as you ask yourself if financing a rental property with no money down is right for you.
- The first con to putting zero down at the time of purchase is that it may take you longer to pay for your property. Consider this, if you put a large down payment at the time of closing that decrease your loan amount from the start. Without a down payment, you are likely looking at the entire cost of the property split into loan payments. By carrying a higher loan balance, it may take a longer time to pay off the cost of the property.
- Additionally, without little or no down payment required you may have to get private mortgage insurance. Private mortgage insurance is typically required when a down payment of less than twenty percent is made. It may present an additional cost you have to pay for monthly, depending on how your arrangement is set up.
- Finally, perhaps the most daunting con when it comes to putting zero down is that you eliminate a lot of loan options. When it comes to buying a rental property with zero money down, or even a house, you may want as many financing options available as you can get. By searching for a zero down payment mortgage you may find yourself with fewer options.
Summary
There are numerous options available when it comes to buying a home with zero down. Whether it is through a VA loan or an FHA loan, homebuyers have several routes they can take. If you are an experienced investor asking yourself how to buy investment property with no money down, or even if you are a homebuyer attempting to keep their savings in tact, it is worth looking into zero down options.
When it comes to purchasing a new property, whether it is an investment property or your first home, it is crucial to weigh all of your options. A down payment may seem daunting at first, but will higher loan payments cause you increased stress in the future? On the flip side, are your savings holding you back from buying your first property, and you know monthly payments would work better for you? The number one thing to consider when determining whether or not a zero down loan is right for you, is your situation.
Have you purchased a property with zero down? Share your experience with your fellow homebuyers in the comments below!
Ready to start taking advantage of the current opportunities in the real estate market?
Click the banner below to take a 90-minute online training class and get started learning how to invest in today’s real estate market!
