How to Buy a House with No Money Down (2024)

Have you ever heard of the USDA Rural Development loan? If you haven’t you could be missing out!

We were able to buy our first home with no money down. Yup, that’s right, a legit zero down payment mortgage. If you want to know more about this program then keep reading! (PS: If you’re selling a home and looking for tips on how to stage your house to sell quickly, be sure to check out my post on that as well!)

How to Buy a House with No Money Down (1)

You can really buy a house with no down payment. Do I have your attention now? It’s not a scam, and it’s NOT just for first time home buyers. It’s not a well-known option, but it’s the real deal, and today I wanted to share a bit about our experience with the USDA Rural Development Home Loan.

Oh and btw: this is also how you can buy a house with bad credit! Interested? Keep reading!

How to buy a House with No Money Down

We bought our very first house a little over a year ago. One of the hardest things was figuring out financing options.

We did NOT have the required down payment for a traditional loan. We did not have the required down payment for an FHA loan either. We just knew that we had to get out of the renting vortex.

We’d sunk SO much money in rent over the years into overpriced apartments, security deposits and alleged “damages”. We’d been sued by a previous apartment management company for falsified “damages” which was later dismissed in court as a scare tactic when they had sued ALL 9 tenants that moved out that month for the same exact reason…and then didn’t bother to show up to court on the assigned date.

We’d had ENOUGH of shady management companies and difficult landlords. We wanted our own home, and we wanted it NOW.

While that may not seem to be the most fiscally responsible approach, we did do TONS of research on our options. We eventually stumbled upon the perfect option for us: The USDA Home Loan Program.

What is the USDA Rural Development Program?

Most people aren’t aware of this program. Its a home loan that is guaranteed by the US Department of Agriculture, also known as the USDA. The Rural Development loan is an option in some areas.

So how can you buy a house without a down payment?

Basically the USDA provides an incentive (in the form of low interest rates and 0% down payment) for families to buy a home in a rural area. This helps revitalize the economy in these lower-population areas, and allows folks like us with not a lot of up-front cash to take advantage of a great deal!

You do not have to be a first-time home buyer to utilize the USDA zero down payment mortgage program. Its important to note that not all areas qualify for this loan…even some you might think of as “rural” may not technically qualify through the official rules of the program.

If you’re interested to see what towns and areas qualify where you are interested in buying, you’ll want to go to the USDA Rural Development website. In the left sidebar under “Property Eligibility” click single family homes, and input the address of the home you’re looking at.

It requires a bit of research, but in the end, we were able to buy a beautiful house with no money down.

Here’s a PDF factsheet with some of the highlights of the USDA Rural Development Loan Program.

How to Buy a House with No Money Down (2)

There are income limits, but they are fairly generous. There’s also a low income version (a USDA Direct Loan) but we used the USDA Guaranteed version. Both options are no down payment mortgage options.

Overall the experience was only slightly more challenging than a conventional mortgage (simply because you are more limited in where you can search for properties), but even for us first-timers it went extremely smooth.

We showed up to our closing with a check for $100 in our pocket. That’s literally all we paid! It was our portion of the closing costs not covered by the seller (who paid the majority).

I am by no means a financial expert, or a mortgage guru, so I can’t tell you if this option is right for you. It certainly isn’t for everyone: our tiny town of 8,000 people is charming but a little isolating.

If you don’t mind that sort of thing (even better if you ENJOY living out in the middle of nowhere) this is definitely an option you want to consider.

I’m not being paid by the USDA or anything, I just wanted to share this option because its not one that is well-known and I think for the right family, it could really be beneficial.

Oh, and don’t let the “rural” thing scare you. Our town qualified as rural because of its size, but we aren’t living in a farmhouse shack. This is our house. We live in a beautiful subdivision in this quaint little town.

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What if I don’t qualify for FHA down payment assistance?

Doesn’t matter. This is a totally separate program. You don’t need to be a first time home buyer to take advantage of this no down payment mortgage option.

If you’re thinking about buying a house, check out my posts on tips for first time home buyers and how to buy a house without losing your sanity! And when you’re ready to sell your home, check out my DIY home staging tips.

Is this a down payment loan?

No, but you will have to pay for PMI. This is something you’ll want to discuss with your lender or mortgage officer.

Where’s the USDA Home Loan Map?

You can find the areas that qualify for a USDA mortgage loan here.

Who handles USDA Rural Development Loans?

Only qualified lenders can hold the USDA Rural Development loans. See if your lender is qualified by checking this list.

Can you buy a house with bad credit?

Yup! We did not have good credit when we bought our house. You’ll want to check the lender requirements

How to Buy a House with No Money Down (2024)

FAQs

How to Buy a House with No Money Down? ›

FHA loans are another option for first-time home buyers who don't have a sizable down payment. You can get an FHA loan on a primary property with as little as 3.5% down. But the big selling point of an FHA loan is that your credit score can be as low as 580 if your house payment and overall DTI are low enough.

What credit score is needed to buy a house with no money down? ›

You'll usually need a credit score of at least 640 for the zero-down USDA loan program. VA loans with no money down usually require a minimum credit score of 580 to 620. Low-down-payment mortgages, including conforming loans and FHA loans, also require FICO scores of 580 to 620.

How do you buy a house if you don't make enough money? ›

State Or Local Assistance

Some state or local housing agencies may offer down payment assistance as grants or forgivable loans. You should also look into your state's mortgage credit certificate program, which gives lower-income homeowners a tax credit for interest paid on their mortgage.

Can I buy a house with no money saved? ›

It's possible to buy a house with no money upfront, using mortgage products that don't require a down payment. There are a few things to keep in mind, though. For one, you're still on the hook for closing costs and any moving expenses when you close on the house.

Which type of mortgage does not require a down payment? ›

Two types of government-sponsored loans – VA loans and USDA loans – allow you to buy a home without a down payment. Each of the two loans has a very specific set of criteria you must meet to qualify for a zero-down mortgage.

What is minimum credit limit to buy a house? ›

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).

What credit score is needed for a 300k house? ›

Different lenders have different rules, but typically they require a 620 credit score for conventional loan approval. Individual lenders can impose higher minimums, and it's important to highlight this.

How is anyone supposed to afford a house? ›

Keep your monthly payment to no more than 25% of your take-home pay. If you're a first-time home buyer, put at least 5–10% down. But 20% or more is even better because you'll avoid paying PMI! Pay for closing costs and moving expenses with cash.

How can I buy a house with no source of income? ›

For example, some alternate sources of income that lenders may consider as they go about reviewing your application include, but are not limited to:
  1. Child support payments.
  2. Alimony payments.
  3. Rental property income.
  4. Retirement income.
  5. Investment income.
  6. Divided payments.

How to afford a house on single income? ›

Is buying a home on a single income possible?
  1. Save up for a larger down payment. ...
  2. Shop around for the best mortgage rates and terms. ...
  3. Boost your credit score. ...
  4. Consider a co-borrower or co-signer. ...
  5. Look for affordable homes in your area. ...
  6. Apply for government programs and grants. ...
  7. Negotiate with the seller.
Jan 10, 2024

Do you need money in the bank to buy a house? ›

To qualify for a mortgage loan, you'll usually need a certain amount of money set aside in your savings account or investment accounts. Known as “cash reserves,” these are dollars you won't be using to cover your down payment or other closing costs.

How much money do you have to have saved to buy a house? ›

A good number to shoot for when saving for a house is 25% of the sale price to cover your down payment, closing costs and moving expenses. (This amount is separate from saving up 3–6 months of your typical living expenses in a fully-funded emergency fund—which I recommend you do first, before saving up for a home.)

What is the easiest home loan to get? ›

FHA loan: 500 credit score

You can qualify for an FHA loan with a low credit score of 500 and a 10% down payment, or 3.5% down if your FICO is 580 or above. FHA loans accept applicants with credit scores as low as 500. Applicants with scores between 500 and 579 need a 10% down payment.

What credit score do you need for a no-down payment? ›

The USDA doesn't require a down payment and doesn't set a minimum credit score requirement, though most lenders will want borrowers to have at least a 640.

What Cannot be used for a down payment? ›

If you're trying to figure out how to come up with your down payment, it's important to know what you can and can't use. For example, it's possible to use a second mortgage, a piggyback loan or even a loan from a friend or family member, but you can't use a personal loan or a credit card cash advance.

What credit score is needed to buy a $400,000 house? ›

Your credit score has less bearing on your ability to get a mortgage than you might think. The minimum FICO score for a conventional loan is 620. The best rate comes with a score of 740 or higher.

Can I buy a house with no money down with a 800 credit score? ›

1. Conventional Mortgage: A conventional mortgage is not backed by the government, providing competitive interest rates and terms. To qualify for a no-money-down conventional mortgage, you'll typically need a credit score of at least 620 and a debt-to-income (DTI) ratio of no more than 43%.

How much of a loan can you get with a 720 credit score? ›

You can borrow $50,000 - $100,000+ with a 720 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

What is the minimum credit score for a FHA loan? ›

FHA minimum credit score

If you put just 3.5 percent down, the minimum credit score for an FHA loan is 580. You can qualify with a score as low as 500, but you'll need to make at least a 10 percent down payment.

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