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How to buy a house with almost nothing down

If you're a middle-income buyer who could otherwise afford to buy, you may be able to get help with the down payment. In some cases, you can get a home with no down payment at all.

By Marilyn Lewis Aug 22, 2013 11:37AM

Real estate agent (© A.G.E. FotoStock)The housing crash made mortgages really hard to get. Now, though, mortgage borrowing is getting easier.


Not easy, mind you -- as in the days when people joked that all you needed was a pulse. But doable for middle-income Janes and Joes with credit scores of 660 or higher.


Rates are rising, of course, making it more expensive. But there's a bright side: When rates were superlow, lenders focused on profits from the tsunami of people refinancing.


Rising rates have put an end to most refinancing, and homebuyers, including first-time buyers, are suddenly the focus of lenders' attention.


If you have a steady job and a track record of paying your bills on time, and if you earn enough to make a house payment with money left over for other bills and expenses, you've got a decent shot, says Douglas Robinson, a spokesman for the nonprofit NeighborWorks America.


Last year, NeighborWorks housing counselors advised 100,000 people across the country, and the organization helped 15,000 people buy a first home.


Down payment assistance

That's nice, you might say. But what about the down payment? That big chunk of cash is what stands in the way for many people.


If you qualify for a conventional loan (the least-expensive type, which conforms to tougher rules written by giant mortgage companies Fannie Mae or Freddie Mac) you'll need a down payment of at least 5%.


First-time buyers commonly use FHA (Federal Housing Administration) loans. These are easier to get but are becoming more expensive. For an FHA mortgage, you'll need a down payment of at least 3.5%.


However, a number of nonprofits can help middle-income buyers with down payments. Some buyers are able to get a home with no down payment at all. The target for these grants and loans is middle-income buyers, not low-income consumers, says Robinson.


There's likely to be an agency or nonprofit near you that can help. (In a smaller community? Read on about 0% down-payment loans from the U.S. Department of Agriculture.)


What it takes to qualify

To qualify for these loans and grants, you must earn no more than 120% of the median income in your area. The median is the middle of all incomes (not the average). It'll vary by where you live. (This Housing and Urban Development site gives you a general idea of median incomes by locale.)


In Loudoun County, Va., where Robinson lives, for example, the median income is about $80,000. So, you could earn up to $96,000 there and qualify. "But if you live in Louisville, Ky., the median income may be only $64,000," Robinson says. There's no lower limit, but you must qualify for a mortgage.


Here are the kinds of programs a counselor might point you to:

  • HUD's Good Neighbor Next Door program helps firefighters, law-enforcement officers, teachers and emergency medical technicians buy homes at a discount. Some cities have their own similar programs.
  • Wells Fargo's LIFT programs help qualified buyers in 19 cities with down payments. (In some cities, the money has been spent.)

A variety of other grants and loans can help you make the down payment. "If you're a stockbroker, you won't be eligible. But if you are a teacher, a firefighter, a retail employee at Macy's or just a small-business owner and you make $75,000 to $80,000 a year, you would qualify for those kinds of things in New York, Los Angeles or Atlanta, for instance," Robinson says.

How to find help

The wrinkle: There's no single point of contact listing all these programs. Your bank, credit union or mortgage broker may know what's available -- or may not. Wherever you try, say something like this: "I have very little money for a down payment. Where can I go?" Robinson advises.


Keep looking if you don't find a program immediately, he says. Your best bet is asking a nonprofit housing counselor locally. The service is free or cheap. Find one here:

In addition, here are three sources of 0% down payment mortgages:


The Navy Federal Credit Union

Employees of the Department of Defense and their families are eligible to join. That includes members of the armed services (including Coast Guard and reservists), DOD civilian employees and contractors at government or DOD installations. 


The credit union offers 100% (no down payment required) mortgages through its HomeBuyers Choice program. Navy Federal helps members with $2,500 toward closing costs on purchases; loans allow up to 6% of the purchase price to come from the seller. This Washington Post article tells more about the program and about low down payments.


VA (Department of Veterans Affairs)

Eligible veterans, including those who have run into difficulty getting financing elsewhere, can get a home loan with no down payment and no mortgage insurance. The home's price can't be more than the appraised value. Ask your VA counselor or any lender for details.



No down payment is required for a USDA Rural Development Guaranteed Housing loan. The program accepts borrowers with lower credit scores. You can qualify with an income of up to 115% of the median income of your area. (Check your income eligibility here.) The catch is that the home you buy must be in a "rural" area. But the U.S. Department of Agriculture defines "rural" broadly and properties in small cities and towns may fit. Check the property's address for eligibility here.


"It's important not to rush. Don't take the first loan offered to you," Robinson says.


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Aug 26, 2013 9:45AM
Folks can afford to pay the same or more for an apartment and or rent a house but according to some, they cannot afford to be a home owner. Fact is, they can't afford not to be a home owner. Renting is a money pit period. You are literally giving money away each year with ZERO equity. So maybe the person has to go with a starter home as opposed to their Dream House. However, when it's a non-profit paving the way, why would any poster try and lead them away from owning a home and instead pay the same or more, RENTING.

Owning a home increasing your options while renting at the same rate or more doesn't. Are there emergencies, that's true regardless. Not owning a home won't necessarily make making that easier. Like I stated, owning a home increases your options. You have to live somewhere and make sure when you buy a HOME, you aren't drowning in Credit Card Debt and you have health Insurance. Folks that always scream, well if you can't afford the down payment, you don't deserve a home indicates more of how we have become a Godless Society. Folks know how to preach from the Bible but hardly know how to live from it.

Aug 26, 2013 11:50AM
Let me see, you still have to pay the, RENT is too Darn High, when you can't budget or manage your finances. The SuperRich sometimes go broke and most pro Sports Player do. And for some reason, many who win the lottery. It can happen to anyone regardless of income.

There is little reason we can't have more home ownership when the Rent is the same or higher. You can manage around many issues of a home and guess what, sometimes do the repairs yourself. That's how it use to be.

Some people try to find everyone reason not to encourage Home Ownership while also making it harder to do so. Folks should concentrate more on making sure folks don't buy more Home than they can afford as opposed to anything else. Aka starter homes. Renting is a money pit, and it always will be a money pit.
Aug 26, 2013 11:19AM
Home ownership is better than renting in most but not all cases.  Renting is the best option for people who cannot budget or manage their finances.  When the furnace goes out in the middle of winter or the place is flooded by a plumbing leak, a renter just calls the landlord.  A homeowner is stuck with the repair bill; a real dilemma for people who cannot save and maintain an emergency fund..   
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Gregory Lawson
Aug 23, 2013 8:32AM
If you can't afford a down payment, you can't afford to be a home owner. Owning a home inherently incurs costs, even for basic maintenance and upkeep. If you are that cash strapped that you lack a downpayment, wait to buy and build an emergency fund to ensure that you are prepared for whatever unexpected financial events may come in the future including your own job security, home value, emergencies, and medical needs. Will you miss out on these low interest rates? Perhaps. Will you have the piece of mind that you are financially prepared for the future. Yes. Ultimately, buying a home you cannot really afford will cost you far more than an interest rate bump.
Sep 14, 2013 3:38PM
This article is so reminiscent of the same thought processes and game playing that created the first housing debacle of this century.  I know we Americans have short memories but this short????  I am a recipient of the USDA Home Loan deal.  House in San Antonio, Texas built by LGI Homes.  Appraised for $1000.00 above cost, so the USDA took the deal.  Now the home is valued at 77k while we still have a balance of 122k due.  I did all the usual homework and then after we did the deal, all the vacant properties around this geographical area began to be sold.  Now the matter of housing saturation is what has killed our property value.  In just 3 years over 650 homes have been built and sold, I mean they sell them like they are cheap pancakes.  Thus what was once pristine land is filled with shingled roofs the highway is under reconstruction already due to the accidents and deaths.  So folks, take it from a suck, don't buy in the South of San Antonio unless you want to lose money, be faced with high crime and be sucked into a population explosion that only raises your property taxes, does not lower them.  I keep kicking myself and repeating, I'm a ****, I'm a ****.................Buying a home is more of a gamble today than the stock market in which I do relatively well.  Seems you just can't do enough research anymore when trying to buy a home. 
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