Alternatives to a No-Down-Payment Mortgage
Let’s look at how to receive a VA loan or a USDA loan, two loans that allow you to buy a home with no money down.
Veterans Administration Loans
If you are an active-duty servicemember, person of the National Guard or reserves, or the qualified surviving spouse of a deceased veteran, you may be eligible for a VA loan. VA loans are backed by the Department of Veterans Affairs and are a terrific way to buy a home with no money down. In addition, VA loans allow you to pay a one-time VA funding charge of 2.3 percent of the loan value in place of mortgage insurance. The funding charge with no down payment for each successive use of a VA loan is 3.6 percent.
To be eligible for a VA loan, you must meet at least one of the following service requirements:
- Served 90 days of active duty in a row during the conflict
- Served 181 days of active service in a row during peacetime
- Served in the National Guard or Reserves for more than 6 years, or for at least 90 days under Title 32 commands, with at least 30 of those days being consecutive
- Be discharged due to a service-related disability
- Be the spouse of a military member killed in the line of duty or suffering from a service-related disability.
- Aside from service requirements, you must have a credit score of at least 580 to qualify for a VA loan with Rocket Mortgage®. Other lenders’ requirements may differ.
Loans from the USDA
A USDA loan is one that is guaranteed by the US Department of Agriculture. Rocket Mortgage does not currently offer USDA loans. USDA construction loans and USDA loans are available from the government to support development in rural and suburban regions. A USDA loan requires no money down. USDA loans are also less expensive than other types of loans.
To qualify for a USDA loan, you and your home must meet a few conditions. First and foremost, your home must be in a rural or suburban setting. To see if your residence qualifies, look at the USDA’s map of qualifying locations. On this map, anything outside of an orange zone is considered rural. Furthermore, your home cannot be a working farm. It must be a single-family dwelling, and you must reside in it as your primary residence.
To qualify, you must also meet a certain financial requirements.
Your household’s total gross income cannot exceed 115 percent of the median income in the county in which you live. For the best chance of qualification, your debt-to-income ratio should be less than 45 percent, and you should have a FICO® Score of at least 640.