Most people believe that you need $5,000, $10,000 or even $20,000 to purchase a home.
This used to be the case, but simply isn’t true any more. Many programs exist to help
reduce or eliminate the need to invest any of your cash at closing.
This is a brief summary of the programs available.

These loans are insured or guaranteed or insured by the Federal Government, allowing
the lender to make loans available with little or no down payment.
Generally speaking, because the lender has a government guarantee or insurance, these
programs will offer the best interest rates and lowest payments for low or no down
payment loans.

The three major programs are:

FHA is an abbreviation for Federal Housing Administration. This agency was established
to help get homeownership re-established during the great depression. FHA has multiple
programs that allow people to purchase a primary residence with as little as a 2.25%
down payment. Frequently we can combine the FHA program with a local gift or grant program to allow
the borrowers to have no cash of their own in the transaction.

• There are special programs within FHA for:

• Purchasing an owner occupied single family home

• Purchasing owner occupied duplexes or 3-4 unit properties

• Purchasing an owner occupied condominium

• Purchasing and improving a home

Loans are not restricted by geographic location, but there is a maximum loan size. For
example in most areas the maximum loan amount for a single family home is $160,176.
The loan limit is higher in select locations that have higher average sales prices.

VA is an abbreviation for Veterans Administration. This agency was established
immediately after World War II to help returning servicemen purchase homes. It is still
an extremely viable and active loan program. VA loans allow the veteran to purchase a home 
with no down payment, and can be structured to allow the borrower to close with no cash investment .
A military service period is required. The minimum service period for reservists and National Guard service 
is 6 years. The time period for active service varies by service date and/or conflict period. There is no geographic 
restriction on the program. The current maximum loan available for guarantee by the VA is $300,700.
 Loans over $240,000 may require some down payment and the amount of eligibility available to the veteran. To qualify
 for a VA loan, a veteran must have a Certificate of Eligibility. The certification be requested through
 your local Veteran’s Service Officer or by mail from a VA eligibility center. The request form is VA Form 
1880. We can assist you in completing and ordering the certificate. The certificate will show an amount 
of guarantee that is available for the Veteran.

Currently, most certificates will show an amount of $36,500. A common misconception is that this is the maximum 
loan the veteran can obtain. Fortunately the loan can be much larger as it’s nearly impossible to find a home in this 
price range! This is just a number that the lender uses as part of the process of determining the maximum loan available
with no down payment.

The Rural Development program is part of the Department of Agriculture. The primary function of their
 single family program is to assist homeownership in rural and smaller communities across America. 
We call the loan "Small Town USA". Many of the large national lenders have issues with the 
appraisals in small towns or rural areas. RD understands the unique nature of the properties 
in these areas and specializes in loans for them. There is no down payment requirement and 
the loans can be structured with no cash investment by the borrower. A benefit of the program 
is that there is no monthly mortgage insurance paid, even if you purchase with no down payment.
There are geographic restrictions. The home must be in an area defined as rural by the Department of 
Agriculture. There is no maximum loan amount but there are restrictions that vary by area and family size. 
There are other programs not insured or guaranteed by the government that still allow the purchase of a home 
with little or no down payment.

There are several options for zero down financing that don’t involve the Federal Government insuring the loans. 
Some examples are:

These loans allow the borrower to finance the full purchase price and in some programs, additional funds to 
pay closing costs and prepaids. These programs used to require extremely high credit scores but are now 
available to borrowers that may have had some credit issues.

These loans are combinations of a first mortgage that is usually about 80% of the purchase price, 
combined with a second mortgage for the balance. Some of these programs allow the seller to pay closing costs, 
allowing the borrower to purchase the home with no cash investment.

Some state or local governments make no down payment financing available for borrowers that haven’t had an
 ownership interest in a primary residence during the past 3 years. These loans will often have very favorable interest 
rates but are generally for excellent credit borrowers. Income and purchase price limits may apply.