100% Financing: No down payment mortgages for home buyers

Many potential homebuyers think they need a cash down payment of 10 percent or 20 percent of the sale price to purchase a home. But, the facts are that you can buy a home with much less cash out-of-pocket. For example, there are alternative options for people who do not have a lot of cash down to buy a home, such as the option of VA loans and USDA loans that have zero money down mortgage programs.


VA loans allow qualified veterans to purchase a home for zero money down. VA loans can only be used to finance the purchase of a primary home. This loan type is not eligible for use when purchasing investment properties, or even vacation homes. These loans have no mortgage insurance. But there is what is called a funding fee that varies from as low as 2%, to as high as 3.3% to cover mortgage origination fees, and that can be rolled into the total loan balance. For surviving spouses of veterans and veterans with disabilities, the funding fee may be waived.

You can read more about VA Loans at this link.


Another zero money down program is for low-to-moderate income homebuyers that is through the United States Department of Agriculture (USDA), and is known as a Section 502 mortgage or Rural Housing Loan. These loan are not just for rural living, but also for regular less populated suburban neighborhoods as well.


Navy Federal Credit Union offers 100% financing for first-time buyers with no down payment and no PMI required. However, you need to be an active military member, an employee, family member, and/or affiliated in with the Armed Forces, DoD, Coast Guard, or National Guard. They require no application fee, and up to 6% seller contribution allowed. You can also get up to $5,050 cash back when you buy with their RealtyPlus®.


The Federal Housing Administration or FHA allows your down payment to be as low as 3.5% of the purchase price. This money doesn’t have to be sitting in your bank either. You can actually get this cash from what are called “gift funds”, which can be money from a relative or friend who gifts you the money to buy the home. The minimum credit score requirement is 500 and they even extend loans to borrowers who have recent short sales, foreclosures or bankruptcies on their record, through FHA’s Back to Work program.

However, a five percent down payment is more common and if the borrower is able to pay a higher down payment, this will bring down interest rates and he can even avoid paying the PMI if he can pay a 20 percent down payment. So therefore borrowers who have a small down payment, or no down payment at all, will more than likely have a loan that has a higher interest rate than that of the current market rate.

You can read more about FHA Loans at this link.

If you have any questions about the above mortgage programs or you would like to discuss your current options with a seasoned loan officer, please give me, Erik Sandstrom a call direct at 619-379-8999 or email me at Erik.Sandstrom@CaliberHomeLoans.com.