Living in Southern California is the fulfillment of the American dream. The weather is typically amazing, the ocean isn’t far away, and beachy relaxation is only a short drive away.
Unless you’re receiving a substantial gift of cash, however, buying a house in Southern California without any money isn’t possible. At a minimum, you’ll need to have the liquid funds to cover the closing costs of your new home. But if you’re wondering how to buy a house with no money if you don’t have funds saved up for the down payment, then the good news is that yes—it might be possible if you meet certain criteria.
Purchasing a house without putting any money down
Only a small sliver of programs will allow buyers to skip out on the down payment entirely. These programs are specific to location and job role, and homebuyers must be classified under exacting specifications.
One type of these “zero down payment loans” is a physician loan, only available to those who have already earned their specified degrees. Physician loans are available to those who are already in possession of their D.O. or M.D. degrees. Some loan programs are available to those with a D.P.M degree as well. Special programs also apply to orthodontists or dentists with their D.M.D or D.D.S degrees.
The Rural Development section of the United States Department of Agriculture administers another zero-down payment program. While most of the Southern California region isn’t classified as rural and wouldn’t qualify for this program, certain outlying areas would apply. This loan program has income requirements relating to the average median income of the selected location. This program provides options for applying for a direct loan or receiving assistance through a conventional private lender.
The other major zero down payment loan program is intended for United State veterans, active service members, and eligible surviving spouses. This program is also beneficial in that it reduces closing costs for the home as well. Private lenders provide these VA loans, and they are guaranteed by the Veteran’s Agency to provide favorable terms.
One type of these “zero down payment loans” is a physician loan, only available to those who have already earned their specified degrees. Physician loans are available to those who are already in possession of their D.O. or M.D. degrees. Some loan programs are available to those with a D.P.M degree as well. Special programs also apply to orthodontists or dentists with their D.M.D or D.D.S degrees.
The Rural Development section of the United States Department of Agriculture administers another zero-down payment program. While most of the Southern California region isn’t classified as rural and wouldn’t qualify for this program, certain outlying areas would apply. This loan program has income requirements relating to the average median income of the selected location. This program provides options for applying for a direct loan or receiving assistance through a conventional private lender.
The other major zero down payment loan program is intended for United State veterans, active service members, and eligible surviving spouses. This program is also beneficial in that it reduces closing costs for the home as well. Private lenders provide these VA loans, and they are guaranteed by the Veteran’s Agency to provide favorable terms.
Using an FHA loan when you have a low credit score
An FHA loan can help you overcome your low credit hurdle if you meet specific requirements. Among other prerequisites, you’ll need a debt-to-income ratio of less than 43%, no history of bankruptcy in the prior two years, and a credit score that meets the minimum determined by each lender. Your credit score will determine your down payment on this loan program, which can vary from 10 to 3.5% on a sliding scale.
Determining if a Fannie Mae HomeReady mortgage might work for you
If you’re looking for how to buy a house with no money and your income is 80% of the area median income or less, then you might be eligible for the Fannie Mae HomeReady mortgage program. Many borrowers in this program only need to put down 3% for their down payments. This program does require creditworthiness, so a low credit score might make you ineligible for this particular loan. In addition, an investment of time and energy is necessary for the HomeReady mortgage, with at least one of the borrowers required to take a “homeownership education” course online. The goal of the educational program is to equip homeowners to responsibly borrow money with a complete understanding of all this major purchase entails.
What are the “3 percent down” mortgages?
The “3 percent down” loan programs allow you to finance 97% of your loan with specific requirements attached. You’ll need to purchase private mortgage insurance (PMI), which will add a sum on top of your mortgage payment each month.
- The Conventional 97 Loan requires you to either be a first-time homebuyer or one who hasn’t owned a home in three years or more. You’ll need a credit score of 620 or higher to achieve this loan.
- Freddie Mac sponsors the HomeOne program, and it does require you to be a first-time homebuyer. This program limits you to purchasing a one-unit primary residence, so you can’t use it to buy an investment property.
A Freddie Mac Home Possible mortgage is another option
Freddie Mac sponsors yet another “3 percent down” program called the Home Possible Mortgage. Home Possible mortgages are for very low to low-income buyers, and strict requirements are in place. These sorts of mortgages make sense for retirees, especially as they do not require you to be a first-time home buyer.
Make sure that you can meet your monthly payment
Home buying should be a time of joy—not concern over monthly finances. It’s essential to ensure that you’ll be able to meet your monthly mortgage payment obligation to avoid defaulting on your loan. You don’t want to ruin your credit score or enter bankruptcy due to taking on more than you can handle.
If you’re looking for how to buy a house with no money, but you don’t exactly fit the requirements for any loan programs above, you might want to consider alternate creative arrangements to finance your purchase. If you know a family member who might have the means to help you, you might want to ask for a family loan. Of course, this option would work effectively with a family member who believes in you and trusts that you’ll repay the loan. If you’re starting out with a high-paid career but don’t have much in the way of savings, a family loan might be a potential option to help you hit the ground running.
Whether you’re borrowing money from the government, a private lender, or a family member, be sure to involve Mint Real Estate in your search for a home. Mint Real Estate covers the entirety of Southern California and would be delighted to help you achieve your dream of homeownership.
If you’re looking for how to buy a house with no money, but you don’t exactly fit the requirements for any loan programs above, you might want to consider alternate creative arrangements to finance your purchase. If you know a family member who might have the means to help you, you might want to ask for a family loan. Of course, this option would work effectively with a family member who believes in you and trusts that you’ll repay the loan. If you’re starting out with a high-paid career but don’t have much in the way of savings, a family loan might be a potential option to help you hit the ground running.
Whether you’re borrowing money from the government, a private lender, or a family member, be sure to involve Mint Real Estate in your search for a home. Mint Real Estate covers the entirety of Southern California and would be delighted to help you achieve your dream of homeownership.
