Home buyers in Washington State seeking a zero-down mortgage loan have limited options. Most mortgage programs require some kind of upfront investment from the borrower, in the form of a down payment.
But there are a couple of options out there, and the VA home loan is one of them. Here’s what you should know about zero-down mortgage loans in Washington State.
What Is a Zero-Down Mortgage Loan?
A zero-down mortgage is one where the home loan accounts for 100% of the purchase price. In this scenario, the buyer does not have to make a down payment of any kind. The entire purchase can be financed.
Zero-down mortgages are rare in Washington State, with a few notable exceptions. That’s because most home loan programs require some kind of down payment investment from the buyer.
- The FHA loan program requires a down payment of at least 3.5% of the purchase price or the appraised value, whichever is less.
- Conventional home loans generally require a down payment of some kind, which can range from 3% to 5% on the lower end.
With that being said, there are a couple of mortgage financing options available in Washington State that allow for zero down payment. One is the USDA rural loan program, and the other is the VA mortgage program for military members.
USDA and VA: No Down Payment Required
There are a couple of ways to buy a home in Washington State with no down payment. The USDA Rural Development loan program is available to borrowers in rural areas who meet certain income restrictions. The VA loan program offers 100% financing for eligible military members and veterans.
Here’s an overview of each program:
- USDA: This program provides a 90% government guarantee to approved lenders, which enables them to offer home loans up to 100% of the purchase price. It’s geared toward low- and moderate-income borrowers in eligible rural areas, including select areas within Washington State. It’s a zero-down mortgage option, but it’s only available to a fairly small segment of the population.
- VA: The VA loan program is another way to buy a home in Washington with no down payment. We are particularly passionate about this program, because it rewards our brave men and women in uniform. Eligible borrowers can qualify for a VA loan up to 100% of the purchase price, eliminating the need for a down payment. Here are the basic eligibility requirements.
Using Gift Money to Minimize Your Expense
An alternative to a zero-down mortgage is to use gift money from a family member or other approved donor. This is known as a down payment gift. These days, many mortgage programs allow for gift money from approved third-party donors. This applies to both FHA and conventional home loans. Learn more about using gifts.
It’s not truly a zero-down mortgage option, because an upfront investment is still required. But with this strategy, the down payment doesn’t have to come out of your own pocket. So it can reduce, or even eliminate, the out-of-pocket expense of buying a home in Washington State.
In addition to these zero-down mortgage options for Washington home buyers, there are certain types of home loans that offer a low down payment. We’ve covered some of the most popular options here.