How to Buy a House with No Money Down

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A zero-down mortgage means you do not have to make a down payment to get a home loan. It is difficult to save enough money for a large down payment. So you may be able to get a zero-down mortgage, or we’ve got options for a smaller down payment on a mortgage.

No Money Down!

Here are several mortgages to help you get into that home with little or no money down.

  • USDA
  • VA
  • FHA

USDA Loans

If you want to live in an area within the US Department of Agriculture’s (USDA) rural development program, you may be able to get a mortgage with no money down. We have several experienced USDA loan officers. Our office has placed USDA clients in homes for over 20 years with no money down. No money down is just one of the many benefits of USDA Guaranteed Home Mortgages. USDA has

  • LOW interest rates.
  • LOW closing cost.
  • LOW  monthly payments.
  • 620 credit score minimums
  • Easy way to qualify for borrowers who do not have a credit score. That’s because USDA will count on-time payments for rent, utilities, phone, and other monthly bills while other programs will not.

It is a 30-year fixed rate. You can pay off the home earlier if you like with no financial penalty.

USDA mortgages are not limited to first-time home buyers. You can have a USDA mortgage at any stage of your life, as long as the USDA mortgage is the only real property you own. USDA does have guidelines regarding your income and the geographic location of the home.

As the name implies, USDA is designed for rural properties; however, did you know ALL of Chatham County is in the USDA map of eligible areas! Income is restricted to $90,300 a year for a family of four or fewer while a larger family can earn up to $119,200. Do not worry if you don’t know the USDA guidelines, we are anxious to help you. And we are not just the experts of USDA in Chatham County, but all North Carolina counties.

There are fees associated with the USDA Guaranteed Loan. These fees keep the USDA program thriving and successful from year to year. There will be a 1 percent Guarantee Fee. You can choose to pay this fee upfront and out-of-pocket; however, a majority of borrowers include this fee in the amount they are borrowing. There is also an annual guarantee fee of .35 percent that is based on the remaining principal balance. This will be included in your monthly payment.

Example: A home buyer with a $150,000 loan amount will have a USDA Guarantee Fee of $1,500, making the total loan amount $151,500. In addition, the annual guarantee fee will add $43.75 to your monthly payment with no money down.

If you are interested in USDA, visit their map of eligible areas. It’s not all rural. Go to USDA website here.

VA Loans

If you are a US veteran you may be able to get a US Department of Veterans Affairs loan, commonly known as a VA loan.

  • Low interest rates – among the lowest available
  • No monthly mortgage insurance or private mortgage insurance
  • No down payment

VA loans are approved by the various lenders who offer this type of loan, and we compare lender terms to find you the best rate. The Veterans Affairs Department guarantees the loans for the lender, so there is no mortgage insurance. The VA loan requires a funding fee which can be included in the total loan amount.

The VA funding fee varies, depending on whether you are an active duty veteran or a reserve/national guard veteran. It also varies if you have used your entitlement to purchase a home before or if the veteran is a first-time home buyer. The funding fee is a one-time charge for the VA to “guarantee” the loan. This means if you were to default on a VA loan, the Veterans Affairs Department would cover the loan for the lender.

There are some exceptions to the funding fee. If the veteran is disabled by the VA and receives VA disability, the funding fee is completely exempt! This means a disabled veteran can get a VA mortgage loan for 100 percent financing, no money down and no funding fee included.

We serve communities with a large number of veterans. For 20 years, we have helped veterans and their families purchase homes in North Carolina. We work with many lenders that are favorable to low credit scores and veterans who may have experienced credit hardships in the past. Do not wonder if you would or would not qualify…find out for sure!

Example: While there are many factors that determine a monthly payment, such as property taxes and homeowner’s insurance, here are some VA loan payments that may be typical in areas surrounding Fort Bragg, North Carolina:

  • $   900 a month for a $150,000 home*
  • $1,190 a month for a $200,000 home*
  • $1,340 a month for a $225,000 home*
*These payments are estimates and will vary.

Please call one of our loan officers to discuss your situation or read more at our Pros And Cons of a North Carolina VA Loan. We are available after hours and weekends, too.

FHA Loans

While FHA mortgages require 3.5 percent down, that money may be available through a down payment assistance programThe Federal Housing Administration (FHA) is the largest mortgage insurer in the world. Roughly 30 percent of home loans are FHA mortgages. The FHA mortgage appeals to

  • First-time home buyers.
  • Clients with credit scores below 620.
  • Clients who want to make a low down payment.

A low down payment is possible because FHA guarantees the loan for the lender by issuing mortgage insurance. Clients cover the monthly premium. It is NO LONGER  possible for the home buyer to cancel the mortgage insurance.

Example: On a $200,000 home with 3.5 percent down, FHA would charge an upfront insurance premium of 1.75 percent, or $3,377 financed into the loan. In addition, the monthly mortgage insurance would add about $140 to the monthly mortgage payment. In contrast, if you qualify for a conventional loan with 5 percent down, the private mortgage insurance would not charge an upfront fee and the monthly premium would be about $90, depending on credit scores.

And, if none of these work for you, there are conventional loans that require as little as 3 percent down. Visit Freddie Mac Home Possible to inquire about income and property eligibility. Or you can receive a gift from a family member, or consider borrowing the down payment from your retirement plan. Contact your plan administrator to see if that is available to you. Hint: If your credit score is over 680 and you qualify, a conventional mortgage will typically be a better mortgage option than FHA. There are pluses and minuses to an FHA loan, so it is important to talk to a loan officer that you can trust. Read more of our information on the Pros and Cons of a North Carolina FHA Loan or by visiting the
FHA website, Go to FHA website here.


Why Work With Us?

Carolina Home Mortgage is local and an independent small business. You’ll find our rates are low if you do the comparison. For 15 years we have helped clients become our neighbors You don’t get to do that unless you offer quality and client-centered service.

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or call us. At the end of the day, we report to you, not the bank. We are available after hours and weekends, too!

Helping You Make Carolina Home!