How to Buy Your First Home 

With No Money Down

The Down Payment is the Main Setback of Purchasing a New Home.

Buying a first home is an American dream. The conventional home buying process involves paying out-of-pocket cash for down payments and closing costs. Unfortunately, many families of modest financial means are unable to achieve this dream because they only have a small cash reserve, or none at all.

Years ago, families would have to postpone buying a home until they had acquired adequate funds. With the rapidly rising home prices of recent years, many families can no longer afford to wait, as the more time passes by, the higher home prices go and the more out of reach owning a home seems to be. There never seems to be enough time to save the typical 20% down payment. Thus, many first time home buyers are seeking ways of obtaining zero down mortgage loans.

If you do not have enough cash for a down payment and closing costs, what options are available? The option that is most heavily advertised is the zero down mortgage.

How Do Zero Down Mortgage Loans Work?

There are many different types of mortgage lenders. Some lenders will only finance 80, 90, or 95 percent of the home price. Thus, homebuyers would need a down payment for the remaining percentage. With a zero down home loan, the lender offers 100% financing.

The stated purpose of zero down mortgage loans is to make the goal of purchasing a new home reachable. Even if a homebuyer cannot afford to pay their own closing fees, a mortgage broker should be able to locate zero down mortgage loans that offer up to 107% loans, with the additional funds that are borrowed above the purchase price to be used towards closing costs. The majority of lenders require a high credit rating for the latter choices.

First time home buyer loans offer unique financing, and most loans are tailored to individuals needs. Getting a home loan does not require good credit. In fact, several lenders are eager to offer first time home buyer loans to those with bad credit or past bankruptcy, however, the lender will charge a higher interest rate to cover the additional risk that is involved.

Home buyers can choose from several loan terms: 15-year, 20-year, 30-year, or 40-year. Lenders offer a variety of loan options, which create affordable living. Because of low interest rates, buyers can take advantage of a low fixed rate.

A more cost-effective approach to buying your first home with no money down is to acquire a grant that covers the cost of the down payment and closing costs. Most states have programs to assist with this. Sometimes the grants are outright cash gifts. Other times, the grants are written as loans which do not require a monthly payment. The loan is completely forgiven in the home buyer lives in the home as a primary residence for a period of time, typically 4 or 5 years.

While there will be more paperwork involved in obtaining a grant to assist with your home purchase, the financial reward is more than worth the effort. Don't let the lack of cash for a down payment keep you from buying your first home. We suggest you visit Our detailed information on First Time Home Buyer Grants.