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Zero Down Home Loans

Many potential home buyers wonder how much they’ll need to save in order to get a mortgage. But did you know with zero down home loans, it’s possible to buy a house without needing the upfront funds of a down payment?

As the name suggests, a zero down home loan (or zero-down mortgage) is a home loan you can get without a down payment. A down payment is the first payment you make toward the home, and it’s due when you close on your home loan. Lenders usually calculate your down payment as a percentage of the total amount you borrow.

Lenders require a down payment because the theory goes that you be more hesitant to default on your loan if you have an upfront investment in your home. Down payments are a major hurdle for many home buyers, as it can take years to save up for a lump sum of cash.

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The only way to get a mortgage through the major mortgage investors with no down payment is if you take out a government backed loan. Government-backed loans are insured by the federal government. In other words, the government (along with your lender) helps foot the bill if you stop paying back your mortgage.

The government offers guaranteed loans to people who need financial assistance when buying a home. This means that government-backed loans are less risky for the lender, and they can expand their usual loan criteria to people with riskier financial profiles, such as borrowers with no down payment.

There are currently two types of government-sponsored loans that allow you to buy a home without a down payment: VA loans and USDA loans. Each loan has a very specific set of criteria you need to meet in order to qualify for zero down home loans. You may want to get a government-backed FHA loan or a Conventional mortgage if you find out you don’t meet the qualifications for a VA loan or a USDA loan. Both options will allow you to make a low-down payment.

Zero down home loans