Can I Buy A Home With $0 Down?

Short answer: yes.

But, there are a lot of stipulations.

You need excellent credit, income and little debt.

When applying for a mortgage, you normally need 3 main things: down payment, income and credit.

1. The down payment is your stake in the home. The mortgage lender cannot lend more than 95% of the value of the home.
2. The credit demonstrates if you are responsible with your bills and gives the mortgage lender an idea of the risk.
3. The income needs to be sufficient to not only make the mortgage payments, but also to pay other debts like credit cards, car loans, student loans, lines of credit, etc. The mortgage, heating and taxes should not exceed 39% of your gross income and when you add on the other debts, it should not exceed 44% of your gross income. This ensures you have sufficient money to live.

So what if you have all of that but you just haven’t saved up the down payment?

Remember I said the mortgage + other debts can’t exceed 44%? Well, if you can borrow 5-10% from another unrelated source like an unsecured line of credit, you can use that for your down payment but only if you don’t exceed that 44% limit.

For example, let’s say you make $36K/yr ($3K/mth) and you want to buy a $100K home (to keep the numbers easy). You need at least $5K down (5% of $100K). If you get a mortgage for $95K, the payments are $500/mth. Add on taxes and heat and the payments are $1000/mth. $1000/mth on $3000/mth is 33%. That’s the number that needs to be below 39%. So far so good.

Now you borrow $5K on an unsecured line. That is going to cost you $150/mth. So if we add that liability on to your mortgage, taxes and heat, you have $1000 + $150 = $1150/mth. $1150/mth on $3000/mth is 38%. That’s the number that needs to be below 44%. And it is! So you are good to go. Your can afford to borrow the down payment.

Only certain banks will allow this and the down payment borrowed must be between 5 and 10%.