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Four Methods:Applying for a Zero-Down Mortgage as Low Income ApplicantApplying for a Zero-Down Mortgage as a VeteranApplying for an 80-20 MortgageBuying a Foreclosure Home

Coming up with the down payment for a home can be a struggle. Mortgages are available, however, for prospective homeowners at all different income brackets, some offering down-payments as low as 3.5% of the value of the home. Figuring out what options are available to you is the important first step of home ownership.


Method 1 of 4: Applying for a Zero-Down Mortgage as Low Income Applicant

  1. 1
    Gather the basic requirements for a Federal Housing Authority (FHA) Loan.
    • Proof of residence at current address.
    • Employment history
    • Proof of income, including W-2 forms, pay stubs, and tax returns
    • Loan history
    • Approximate value of your personal property[1].
  2. 2
    Meet with your FHA loan officer.
    • Express your interest in acquiring a home with no money down. It may be that low money options are available and are a smarter decision for the kind of home you're interested in.
    • Make sure that you've prepared all the documents listed above.
  3. 3
    Determine whether or not you qualify for a special Zero Money Down Loan in your state.
    • The Department of Housing and Urban Development (HUD) offers many options for low money or no money down mortgage on a state-by-state basis, based on your finances.
    • Most FHA loans require a payment of at least 3.5% of the lesser of all appraised values of the home[2].
    • This includes non-profit programs like the Habitat For Humanity, which builds and restores homes on a project-by-project basis.
    • In rural areas, the USDA rural development office works with residents to provide low income loans.
    • Find out what programs you might qualify for and what programs work with your finances by speaking with your FHA loan officer and by consulting the HUD listing for your state, found here: www.hud.gov/buying/localbuying.cfm

Method 2 of 4: Applying for a Zero-Down Mortgage as a Veteran

  1. 1
    Contact the Veteran's Administration (VA) office in your state.
    • Established in 1944, the Serviceman's Readjustment Act (aka the GI Bill), was signed into law, providing guaranteed federal housing for veterans with no downpayment.
    • All Veterans who served on active-duty for a minimum of ninety days and received a discharge other than dishonorable are eligible.
    • These mortgages are often in designated VA housing complexes or areas. Research the options available to you in your area here: http://www.benefits.va.gov/homeloans/
  2. 2
    Calculate your Debt-to-Income Ratio
    • Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income.
    • The maximum ratio to qualify is 41%.
    • In the event the number exceeds the 41%, the VA has a residual income guideline which can allow approval, yet are not considered a compensating factor[3].
  3. 3
    • You'll need your DD214: Proof of Military Service form, and a prospective property.
    • Remember: All Veterans who meet the criteria are eligible for the loan, but that doesn't mean that you'll necessarily qualify for the loan you're trying to get.
    • The VA guarantee's a loan of 25% of an amount up to $104,250, generally the list price of the home, plus the funding fee, which limits the maximum loan to $417,000.
    • Because there is no down payment involved, this will be a Guaranteed Loan, which means that the lender is protected against failure to pay[4].

Method 3 of 4: Applying for an 80-20 Mortgage

  1. 1
    Determine if you qualify for two mortgages.
    • Sometimes, prospective homeowners with very high credit ratings will take out two mortgages: one that covers the price of the home and another that covers the cost of the down payment.
    • This is sometimes called an 80-20 loan (depending upon the specific percentage of the mortgage breakdown, it can also be 90-10, etc.).
    • If you do qualify, you'll have two payments, but talk to your financial advisor about consolidating them into a monthly lump sum.
  2. 2
    Use caution.
    • Before the mortgage crisis of 2008, these loans were easy to come by and were possible to profit from. It was, however, one of the main causes of the mortgage crisis of the that year, making it extremely an extremely difficult option to pursue now.
    • The problem with these types of loans is that, if the home loses value, you can end up owing more than the value of the home, meaning that you'll lose money if you want to sell your house.
    • Likewise, an 80-20 loan will involve a much higher interest rate and higher monthly payments, which can make it difficult to make ends meet if you're having trouble coming up with the monthly payments.[5][6]
  3. 3
    Always talk to your financial advisor.
    • Use common sense: extreme caution is justified when you're committing to something as big and long-term as a home. Speak to someone you know and trust. Do not get locked into a "too good to be true" just because it avoids a down payment.

Method 4 of 4: Buying a Foreclosure Home[7]

  1. 1
    Research foreclosure homes available in your state.
    • If you're committed to buying a home with no downpayment, an FHA foreclosure might be the right choice for you.[8]
    • These homes are typically what you might call "fixer-uppers." They've been foreclosed upon, which may mean there's something structurally wrong with the house that you'll need to get fixed as soon as possible. It may also just mean the home was owned by someone who got locked into a high-interest loan they couldn't afford and ended up defaulting, but this option will involve some grunt work on your part to determine this.
  2. 2
    Decide how much work you want to put into your house.
    • Insured (IN) homes are homes that have been foreclosed upon, but meet the Minimum Property Standards (MPS). This means that they've been evaluated by a home inspector, who has "passed" the home.
    • Insured with Escrow (IE) homes require some measure of repair to meet the MPS. This means that the home may have some pressing structural, heating, or plumbing deficiencies that will need taken care of in the short term. The problems are not such that the house is uninhabitable, but significant enough to affect the value of the home.
    • Uninsured (UI) homes do not meet MPS. This means that the home requires structural, heating, or plumbing repair before it can be inhabited.
    • Most of the time, people who undertake the project of a foreclosed home are DIY-types who enjoy the challenging of fixing up a property acquired on the cheap. If you're not excited about the idea of gutting a house and installing a new septic system, (or paying to have this done) this might not be the option for you.
  3. 3
    Have the home inspected.
    • These homes are not technically available for "no money down" mortgages. However, discovering significant structural, heating, or plumbing deficiencies in the home at any insurance level, the repair price of which meets or exceeds the increase of the purchase price of the home, gives the buyer options.
    • Make sure that the inspector knows that you're trying to find structural problems with the home. This is about reasonable speculation. You're trying to prove that the house is worth significantly less than the price at which it is listed.
    • Is the house obviously leaning? Are there large external cracks? Do doors and windows stick? Are the walls cracked or the floors uneven? Are there basement cracks present? If so, draw the inspectors attention to these structural details.
  4. 4
    Calculate the cost of the necessary repairs.
    • If you've discovered significant structural problems, decide how you're going to fix the home up and how much it will cost.
    • If you're going to do the work yourself, how much do the materials cost? How much can you reasonable expect to account for your labor?
    • If you're going to contract the work out, how much will it cost? How long will it take?
  5. 5
    Apply for a 203k mortgage after inspection.
    • Once you've got a quote for the repairs, bring the sum to your FHA loan officer and negotiate for a 203k mortgage.
    • This option may result in a sum for the repairs that exceeds the purchase price of the home, essentially resulting in a "zero money down" payment after the fact.
    • You'll still need to have money up front for this option, but in the long term may result in an "even break" before you start making monthly payments on the property.


  • Beware of predatory lending. The only no money down options available involve either extraordinarily high interest rates or monthly payments, which are dangerous to get locked into. Consult your financial advisor before entering into any "too good to be true" loans.

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