Zero down home loans are not as popular as they were five years ago but they are still around. Lenders have gotten a lot more strict when it comes to qualifications and eligibility, so buyer that comes along wanting a zero down home loan does not look too attractive to potential underwriters. Having additional funds, reserve funds and a down payment is much more attractive and may offer lower interest rates and better terms.
However, zero down home loans are not totally extinct. If you have excellent credit but simply don’t have a large chunk of money to put down, there are options.
The USDA Rural Loan Program is probably the most common zero down home loan with 100% financing, flexible credit guidelines, and no maximum home purchase. The only drawback is that the home must be purchased in a rural development area. There are eligibility and qualifications but this program technically has two loans put together. The first loan is for 80% of the purchase price and the secondary loan is for 20%. The drawback to this is that you may have mortgage insurance because you are getting 100% financing and if you default there’s no equity for the underwriters to fall back on.
Each area has its own home loan programs but there are general federal programs such as a VA loan which is a zero down home loan up to 4% of the purchase price. However, there are eligibility and qualifications that must be met by the potential home buyer. You must be a military personnel or have been in the military in the past. One of the nice things about a VA loan is that the seller will typically pay all the closing costs, making this an extremely attractive and low-cost option.
California also has a down payment assistant loan which is designed to help first-time homebuyers in urban renewal areas. It is usually a second mortgage loan used in addition to the first mortgage loan.
Each of these loans has different requirements so for your specific situation it’s best to contact your Tri-Valley or California mortgage broker to figure out what works best for your needs and the type of house you’re going to buy.