Down payments are a nearly insurmountable barrier to homeownership for many people. After all, if you’re purchasing a $500,000 home, a 20% down payment comes out to $100,000—not exactly a small chunk of change. Even a 5% down payment would equal $25,000. Not many people have that amount of money stashed away.
Did you know that zero-down mortgages are available? There aren’t many programs out there, and not everyone will qualify, but they do exist. Today we’re going to tell you some need-to-know facts about these programs to help you determine if they are your key to homeownership.
Zero-Down Mortgages: Two Options
When we explore zero-down mortgage options for our clients, these are the programs we investigate:
- VA Loans: Veterans and active military members who meet certain income and credit requirements might qualify for this zero-down option. VA loans don’t require PMI, and closing costs are usually minimal.
- USDA Loans: These programs are designed to help low- or moderate-income buyers who meet certain credit requirements purchase a home in designated rural areas.
The Pros of Zero-Down Mortgages
The main advantage of zero-down mortgages is clear: The amount of money that a homebuyer with a zero-down mortgage needs to bring to closing is drastically reduced. Borrowers who can afford monthly mortgage payments but have trouble saving the lump sum that homebuying usually requires are not left out of homeownership with these programs.
Potential Downsides to a Zero-Down Mortgage
Believe it or not, zero-down mortgages have a few cons to consider. Here’s what you need to know:
- Without a down payment, building equity in your home will be a slower process. If you want to take out a home equity loan or line of credit in the future, you’ll need to wait until you have sufficient equity.
- Your mortgage term will likely be longer than if you had put money down on the home. This means you’ll be paying interest for a longer period, leading to more money spent over time.
Contact MortgageDepot Today!
Are you struggling to save money for a down payment on a home? Our experienced loan officers specialize in niche mortgage programs to help buyers in difficult financial situations realize their homeownership dreams. Contact MortgageDepot today to see if you qualify for a zero-down mortgage program!
Connect with one of our loan consultants to learn more.
