Zero down home loans were the cause of many of the subprime mortgage issues that we had about 10 years ago but nevertheless, they are still available in the form of a USDA loan.
These loans are backed by the US Department of Agriculture and is part of the Rural Development Guaranteed Housing Loan program. These loans are available to homebuyers with average to below average credit scores and are a good option for zero down home loan. These loans offer reduced mortgage insurance premiums as well and below-market mortgage rates. So, why wouldn't they seem like a good idea?
These USDA loans are for non-city dwellers. These homes must be in specific areas surrounding cities but not within a city. This means that only certain neighborhoods, communities, and regions are eligible for a USDA loan. Don't let this turn you off, however, because there are lots of homes that fall into this category. The home must meet the location requirements and borrowers must meet income eligibility requirements as well.
The benefits to a USDA loan besides the no down payment perk, is that they have low annual mortgage insurance fees, typically just .35% annually. This is lower than an FHA loan. There are upfront fees as well which is about 1% of the loan amount compared to FHA's 1.75% upfront fee.
USDA mortgages are also available to higher mortgage limitations whereas FHA, VA, and conventional loans are lower. They are available as a 30 year fixed mortgage only, which can be the downsize, especially if you plan on going with the shorter term mortgage.
Other options for zero down mortgages include a VA loan. This loan is from the Department of Veterans Affairs and is available to most active military personnel and veterans nationwide. VA loans are made through private lenders and are guaranteed by the Department of Veterans Affairs and they do not require any mortgage insurance. Better yet, sellers tend to pay most of the closing costs with the VA loan however, you do need to be an active military personnel or veteran to qualify.
Other downsides to a zero down loan? Besides having limitations on where you can purchase a property, really the only limitation is the mortgage insurance, which as I stated before, is not that expensive. This might be a great option for those that just can't pull together a large down payment for a home.
If you are interested in learning more about zero down home loans feel free to call our office at any time. We have lenders on call that would be happy to answer any questions you might have and I can give you a complete list of homes that would meet the search criteria for a USDA or VA loan in the Columbus area.
I originally posted this on Linkedin here: https://www.linkedin.com/pulse/should-i-try-zero-down-loan-donald-payne?published=t
As a certified Realtor® for the top-rated Columbus Realty Firm - Vision Realty, with 32 years of dedicated real estate experience, I can help buyers, sellers, investors, short sale sellers and more find, sell or invest in the right property, at the right price, at the right time. Contact me anytime for updates and information on the Columbus OH Real Estate market.