Zero Down Mortgages

By Tony Dankha, Mortgage Loan Officer

People assume that no down payment means no home, but that’s not the case. Zero down mortgages can be used to purchase a home, making homeownership a realty for many.

You heard that right. It is possible to buy a home without any money down. Zero. Nothing. Zilch.

There are a few different programs out there that make a zero down mortgage possible. Veteran Affairs (VA) Loans and a USDA Rural Development Loans are two of these programs.

VA Loans

At Michigan First Mortgage, we appreciate the service of all of our military personnel, and we also know that the service of one family member means sacrifice for the whole family. As a recognition of this sacrifice, we offer VA loans to active and retired military members, as well as surviving spouses of military personnel. In addition to the zero down benefit, VA loans also have a low interest rate and no private mortgage insurance (PMI). Two things to keep in mind with VA loans that are not typical of other loans are:

  • VA loan may only be applied to one’s primary residence and it can’t be a secondary/vacation or investment property
  • VA loan requires a one-time fee paid directly to the Department of Veteran Affairs (usually around 1.25%-3.3% of the loan amount). This fee may be waived for disabled veterans.

USDA Loans

These loans are backed by the Department of Agriculture and were first established to help low-to-moderate income households qualify for mortgages in certain geographic areas, typically more rural where communities are expanding. This means that these types of loans are restricted by geographical limits, but as long as the location meets the requirements, and the borrower meets the income limits, 100% of the appraised value of a home can be borrowed. Another thing to keep in mind is that rural does not necessarily mean a secluded area by a country road. Oftentimes, some suburban areas fall under the umbrella of rural development, so it’s always helpful to check whether the area you are searching in meets the geographical requirement of a USDA loan.

Having a down payment is beneficial because it lowers your total amount borrowed, and in return, can reduce your monthly payment. A sizable down payment can make a difference on the interest rate as well. Even a 1% reduction in interest rate can potentially save you thousands of dollars over the life of the loan.

Zero down payment mortgages bring the dream of homeownership into fruition for so many people. Be sure to ask your mortgage lender about all the options that may be available to you. Zero money down means more money in your wallet for renovations, adventures, and anything else you may desire!