Home Buyer FAQ: Do I Still Need a Down Payment?

Recently, someone searched “no down payment” homes and landed on our site.  Truthfully, it makes me more than a little bit nervous when someone is considering buying a home without having the resources to not only come up with the down payment but also to put some money aside for potential problems once they do own a house.

Saving for a down payment on a house

For quite awhile in the early 2000s, it was basically as easy as fogging a mirror to get a home mortgage loan.  Lenders took your word for how much money you had, how much you made and approved loans that had no real chance of being repaid – essentially setting some home buyers up for a foreclosure shortly down the road.  Look where that got us.

Now, before anyone gets their panties in a wad, I’m well aware that borrowers have to shoulder some blame in the entire mortgage mess as well.  People who lied on their mortgage applications don’t get a lot of sympathy from me and certainly shouldn’t expect it from their neighbor whose home value dropped because the banks are selling foreclosures for much less than a normal seller would.

Now that I’m off my soapbox, I’ll say that there are still loans that don’t require a down payment.  However, these opportunities are very limited.  Limited like limited to 2 programs with specific requirements.

VA Loans

VA loans don’t have a down payment requirement, but they are limited to qualifying military (or former military) personnel and the maximum loan amount in Louisiana is currently capped at $417,000.

Guide to VA loans

Rural Development Loans (USDA)

Rural development loans do not require a down payment either, but they are limited to qualifying properties and have income restrictions for buyers.  In the New Orleans area, you’ll typically find USDA eligible properties in outlying areas like Lafitte, Waggaman, and in portions of Plaquemines and St Bernard Parishes.  If you are looking to live right in the city, a USDA loan is not going to work for you.

More about USDA loans

Are there any alternatives?

State, parish and city programs that provide down payment assistance come and go quickly since they typically have a set amount of funds available for buyers – when the money is gone, the programs end until additional funding is approved.  This is where working with a local lender is in your best interest, because they are up to date on what programs, if any, are currently available in the areas that you are interested in.

The final alternative is to wait while you save for your new home.  Believe me, it’s worth it in the long run.

 

 For a list of local lenders we have successfully worked with in the past, please contact us.

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