Do Zero-Down Mortgages Still Exist?

It’s just not like it used to be! That applies to many situations… include mortgages. There is so much talk these days concerning income, assets and higher credit score it takes to qualify for a mortgage. Perhaps one of the most misunderstood conceptions out there today suggests homebuyers will always need at least 20 percent down to qualify for a mortgage.

That could not be further from the truth. The truth is, home loans are still available with no money down.

There are several ways to get a zero-down home loan. USDA Rural Housing programs, VA loans for veterans, and FHA mortgages combined with down payment assistance all achieve the zero-down objective. Here is a rundown of the USDA program and what is required.

USDA Rural Development Home Loans

USDA loans are 100 percent zero-down mortgages designed to make it easier for people to buy homes in rural areas of the country including many homes in Indiana. To get a USDA mortgage, your property must be eligible (primary residence in a designated rural area) and you must be eligible too (income cannot exceed 115 percent of the median household income for your area). Perhaps to your surprise, much of the U.S. is considered rural. To see if your area qualifies, you can check the property’s eligibility on the USDA website. You can check your income eligibility as well.

Unlike the VA and FHA home loans, the USDA sometimes actually lends you the money to buy your home. This is called a Direct Loan. A Direct Loan comes with a term of up to 38 years and the interest rate is set by the government. For those of you with low or very low incomes, your mortgage payments could be subsidized as well.

Moderate-income borrowers can get USDA Guaranteed Loans, in which the money comes from private lenders. As with VA and FHA mortgages, you need to shop for the best mortgage rates and terms because they are not dictated by law.

It’s always best to check with your lender for the latest rules and qualifications for a 0 down loan.