Imagine taking the rent you pay to your landlord each month and using it on a mortgage instead. 

That would allow you to become a homeowner and own a property that could appreciate in value to improve your financial future.

What’s stopping you from achieving this dream? If you’re like many, it’s a limited income that makes it nearly impossible to save cash for a down payment. How much down payment is needed to buy a home? That varies, but experts suggest having 20 percent of the purchase price saved for a down payment, while others say three or six percent is sufficient.

Even if you choose a three percent down payment, you’re looking at a significant amount of cash that could take a long time to save, especially with real estate prices increasing. 

For example, if you want a modest $200,000 home, a three percent down payment would equal $6,000. Do you have that much saved? If not, know that you may not need it, thanks to a pair of government-backed loans that require no down payment.

No Money Down USDA Loans

A USDA loan is backed by the U.S. Department of Agriculture. Why is this important? Because that backing means if you fail to repay the loan, the government will help cover it. And this allows lenders to accept borrowers with less than perfect credit and lower income, knowing the government has their back in case such borrowers default on the loan.

What does it take to qualify for a no-money-down USDA loan?

• Have a minimum 620 credit score, although a lower score could still qualify.
• Prove that you’re a permanent legal U.S. resident.
• Proof of steady income and creditworthiness.
• Your household income cannot exceed 115 percent of the area’s median income.
• The home must be your primary residence and be in a rural area.

Besides the benefit of no down payment, USDA loans also typically have more affordable fees and can be used for different types of property, such as:

• Foreclosed or short-sale homes
• Condos
• Townhomes
• New construction homes
• Existing homes
• Manufactured homes

No Money Down VA Loans

Another no-money-down mortgage backed by the government is the VA loan. It’s intended for members of the military, vets, and their spouses. To qualify for a zero mortgage VA loan, you will need the following:

• A minimum 580 credit score, although a lower score could qualify.
• A certificate of eligibility proving military service.
• Six years of service in the Reserves or National Guard.
• 180 days of service in active peacetime.
• 90 days of service in active wartime.

If you’re a spouse of a service member who has a disability related to their time served or who died in the line of duty, you could also qualify for a VA loan.