The 16 Best Zero-Down Home-Loan Programs

Did you know the number one reason preventing the purchase of a home is the down payment? Most people looking to buy think that it is necessary that several thousands of dollars are needed to close on a home. This is simply not true. In fact, you can realize the dream of owning your own home with absolutely no money down and no money needed to close. Certainly there are loan programs available where you can have funds gifted or borrowed from a retirement account or even against an asset, such as your car, for the down payment funds. However, these loan programs outlined below are 100% financed through banks and mortgage companies.

So whether you choose not to dip into your own funds, or you just don’t have any money, there are loan programs available to you. Many of them are well below market interest rates and some target specific groups of people like military veterans, physicians and schoolteachers. Let’s take a closer look at some of them.


No Money and Low-to-Moderate Income

If a lack of money and income has prevented you from purchasing a home, this program has been designed just for you. If your income does not exceed $56,880 (80% of your area’s median income), you can purchase a home virtually anywhere. If you are married and the combined household income is greater than $56,880, this program allows just one spouse’s income to be counted. A good credit history is required. If credit is lacking, alternative documentation such as phone and electric bill payments are acceptable. One of these must be housing related for this program (i.e. rent or mortgage).

You do not have to be a first-time homebuyer but cannot own other improved real estate at the time of purchase. Closing costs can be entirely gifted or seller-contributed up to 3% of the sales price. The property must be a single-family home, condo or townhome and used as a primary residence.

You may select from a 30-year fixed or an adjustable rate (ARM) loan. The ARM product is fixed for 5, 7, or 10 years, and then becomes adjustable for the remaining term.


Targeted Areas

To encourage purchasing homes in moderately priced areas, the government has passed laws that require lenders to allocate low cost funds to individuals buying within those census tracts. The law, known as the Community Reinvestment Act, permits the lending of 100% financed loans at very attractive below market interest rates. These loans have very liberal credit and qualifying criteria with no maximum income limits! Fixed as well as adjustable rate loans are available up to $333,700. Owner-occupied property types are limited to single-family homes, condominiums, or townhomes.


No Money But Very Good Credit

To qualify for this program, you must have good credit and a stable job history. You can borrow up to $333,700 with no money down and finance into the loan your closing costs up to 3% of the sales price. If there are any additional closing funds needed from the buyer, the seller may absorb up to 3% of the sales price. The interest rates are slightly higher than those loan programs requiring cash down payments. Single-family home, condo, or townhome purchases are only eligible under this program.


Physician Zero-Down Program

This loan program allows for 100% financing for existing and newly licensed medical practitioners. To be eligible for this program, the physician must have an excellent credit history. The maximum loan amount is $650,000 for the purpose of purchasing a single-family residence, condominium, or townhome. Both fixed and adjustable-rate-loan products are available.


Private Down Payment Assistance Program

There are many non-profit organizations that offer down payment assistance to home buyers throughout the United States. One of the best is the Genesis Program.  This program provides direct gifts to approved borrowers with no obligation for its repayment. The gift funds, up to $25,000, can be used for the down payment, closing and prepaid costs. Liberal qualifying and credit guidelines are used with no income limitations. Although owner occupancy is required for one of the following property types—one-to-four-unit dwelling, condominium or townhouse—more than one home can be owned at one time.


No Income Verification

There is now available a new zero-down program that requires no verification of income. This is ideal for those individuals who are self employed, commissioned, or tipped. Also, borrowers who are not meeting lender debt-to-income ratios or are earning non-countable money such as unseasoned (recently received) child support, royalties, etc. would be excellent candidates as well. A good credit history is required. Eligible properties are owner-occupied, single-family homes or condominiums.

 

Rural Development Program

There is special financing offered to those interested in moving to outlying areas having a population less than 10,000. Accounting for most cities and towns outside of Austin, the U.S. Department of Agriculture encourages growth to these areas by providing zero-down, guaranteed loans. The program is designed to assist those families having very low-to-moderate income levels in purchasing a home. The maximum income limit is 115% (less certain allowable deductions) of the median family income. If your adjusted income is below 80% of the median income, you may qualify for payment assistance to an interest rate equivalency as low as 1%. This rate can give you a payment hundreds of dollars less than payments offered by more commonly used home-loan programs.

Only owner-occupied, single-family homes, condos, or townhomes can be purchased. No other properties can be owned at the time of purchase.


Public Safety and Health-Industry Programs

Individuals working in the public safety or health care industries can benefit from 100% financing programs allowing housing expenses and long-term debts up to 43% of their income.  Wide ranging eligible borrowers include employees of law enforcement agencies, fire departments, as well as certified health care professionals such as nurses, pharmacists, therapists, and physicians assistants.  The program allows incomes up to 100% of the median family income, and loan amounts up to $333,700 for single-family homes.  Multi-family homes and some condominiums are also allowed.

City of Austin Down Payment Assistance Program

This loan program is exclusively used for financing a property located within the city limits of Austin. It provides qualified, income-eligible buyers a non-interest bearing, non-assumable loan to assist with purchasing a home. Program assistance can be used for down payment and eligible closing costs up to $6,000. The assistance from this program can be used in conjunction with an FHA or Conventional loan to minimize out-of-pocket costs! It can also be used in conjunction with Bond programs, when available, where rates are substantially below market rates. This is a great combination of two excellent programs!

The down payment assistance loan is secured by a second lien on the property and is due upon the sale, lease, or transfer of title. Home equity loans are not permitted without paying off the program’s lien.

Applicants must be first-time homebuyers, or people who have not owned a home during the last three years. A displaced single parent who deeded their share of their homestead to an ex-spouse in a divorce settlement is considered a first-time buyer. The home being purchased must be an owner-occupied, single-family residence or condominium, which price cannot exceed $166,155. Total gross household income cannot exceed 80% of the median family income for the area. Currently, for a single individual, 80% would equate to $39,800; for a family of two, $45,500; for a family of three, $51,200; for a family of four, $56,900; for a family of five, $61,450; for a family of six, $66,000; for a family of seven, $70,550; and for a family of eight, $75,100.


Veterans Have TWO Zero-Down Options

If you are a veteran of the armed forces or a reservist, perhaps the most attractive programs for you would be a VA loan or a loan financed through the Texas Veterans Land Board (specifically called the Veterans Housing Assistance Program). To qualify for a VA loan you must have been active in the military for at least 181 consecutive days, or been active 90 days during a time of war, or have been in one of the selective reserves for at least seven years. To qualify for the Land Board loan program you must have been a resident of the state of Texas at the time of entry into service, or Texas must have been your place of residency for the past two years. Both loan programs allow you to obtain a home loan with zero-down payment and often times little or no money out of pocket at closing! The Land Board loan program even offers interest rates well below market rates to qualified individuals!


Estate-Sized Zero-Down Loans

Many of the zero-down programs offer comparatively low loan limits to the borrower. Some are directed to low income families while others to specialty groups such as veterans and teachers. This particular loan program offers 100% financing on single-family homes, duplexes, and condominiums to qualified buyers up to $1,000,000. Only a fair credit rating is necessary for loan approval. Housing expense along with long-term debts up to 50% of the income is allowed.

 

Credit Challenged And No Money

Even if you have a poor credit history, there is still a zero-down program available for you! Depending upon the severity of your credit, not only may you qualify for a loan up to $500,000, but also up to 50% of your income can be used towards debt and housing expenses. This will give you about 39% more buying power than with other loan programs. You can also add in most or all of your closing costs into the loan! To qualify, you must have a stable job (two years in the same line of work), an established bank account, and some credit history. Single-family residences or condominiums can only be purchased under this program. 

Teacher Zero-Down Program

The teacher zero-down program is a unique program designed to help teachers and school administrators with good credit to overcome the high cost of home ownership by reducing the cash needed to purchase a home. Interest rates are also offered below market by approximately one-half percent. To be eligible, one of the applicants must be a full or part-time teacher, or a school administrator in a public or private, primary or secondary school. A school administrator is defined as a principal, vice-principal, librarian, health care professional (i.e. a nurse, counselor, or speech therapist).  Substitute teachers, teacher aids, cafeteria workers and custodians are not eligible. In order to be considered “part-time”, the individual must have regularly scheduled hours, and the school must be the person’s primary source of income.

Average Credit and Income

There are zero-down programs designed for those having good or bad credit or having low or high income. This loan type focuses particularly on the average individual who does not fall into any one of these specialty groups. He may be a first-time or subsequent homebuyer looking for a property located anywhere around the Austin area.

The program does limit the purchase of single-family dwellings only with loans up to $500,000. However, unlike most loan programs having a maximum borrower income-to-debt ratio of approximately 40%, this one expands that limit to 60%. That gives a person a 50% increase in buying power!

Investor Program

Individuals interested in real estate investing can benefit from loan programs that offer 100% financing for investment properties with one-to-four units.  Individuals with average credit can invest in properties valued up to $500,000.   There are even programs available with limited-to-no income and asset documentation for those individuals that do not have a fit with traditional guidelines.  Whether a first-time or seasoned investor, your real estate portfolio may benefit from the maximum leverage provided through these loans.    

As you can see, there are many loan programs available for people who have little or no money or those who choose not to spend money they do have. People perhaps just like you! There may even be other options available for you than those listed here. If you are interested in finding out if you qualify for one of these programs, please call Steve Bluestone at 512-248-9472.  He would be happy to discuss your options and make the dream of home ownership a reality for you!

Since 1986, Steve Bluestone has been serving the real estate needs of home sellers and buyers. He has maintained his status as one of Austin’s top Realtors by providing not only the finest service, but also providing the most vital component of any successful real estate transaction – information. This special report is just one way he helps arm home buyers with the information they need to maximize their real estate success.

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