Can You Buy Property in New York With Good Credit and No Money Down?
You work hard for your money. You know that you want to own a home soon enough, but getting that down payment is really getting to be a downer.
It’d take years to be able to scrape up the thousands you’d need in order to get that traditional 20% mortgage down payment, right?
Welcome to the new economy. Traditional just doesn’t work anymore.
As people start to get priced out of old school mortgages, many are looking for alternatives that can guide them towards home ownership.
People are really working at showing their mettle when it comes to money management.
A responsible buyer is what banks really should want. So, it makes sense to use good credit to your advantage.
After all, you should be able to qualify if you have a stable job and a good credit history, right?
In the past, a fat down payment was a must if you wanted to be a homeowner. Nowadays, it’s not totally necessary.
If you’ve been wondering how to sidestep the down payment, you’re not alone. Here are some of the better options that can still open up home ownership for you.
Buying with Good Credit and No Down Payment
- Even though putting a downpayment is still the most popular method of buying an apartment or house, putting no money down is an increasing possibility.
- There are a number of options for those who have good credit, but may have limited funds for a down payment or those would rather save money.
- Many types of mortgages today offer close to 0% down such as FHA loans. However, many lenders offering conventional loans now have their own programs, especially for first-time buyers.
- Government-backed loans and programs like VA and USDA loans offer opportunities to buy with 0%.
- Some creative ways to avoid down payment are swapping properties, different approaches to negotiating with the seller such as seller financing or rent-to-own, as well as looking into bridge loans and double mortgages.
Important Considerations For Buying Property
Understanding the types of properties that are available to you can also help you find options for paying nothing down.
Co-ops would be a last option, as many co-op boards have strict regulations on how much should be put down.
Furthermore, besides putting money upfront, the purchasing process involves closing costs. Some of the programs mentioned below also can offer assistance with closing costs.
Even if you eliminated your closing costs with your mortgage, you would still need to pay out of pocket for your attorney, title search and/or insurance, recording fees, and any property taxes you may owe.
Techniques To Shrink Your Down Payment
The best way to get a good lending term out of a mortgage application is to still try to do things traditionally.
Read more: What You Need to Know Before Your Buy Property in NY
So, before you write off your down payment plan completely, consider these options instead.
FHA Loans
The FHA Loan program is a good way to make this happen, and it’s a government-backed program that’s designed to help first time homeowners get their new place.
Most people have FHA loans as their go-to first home loan.
With an FHA loan, you can get your first home loan for only 3.5% down. This makes saving up way more affordable for most people.
They also allow you to use gift money to pay off everything for that down payment.
Getting accepted for an FHA loan is also far easier than with other options. So, it’s absolutely worth a try.
There is a caveat, however. An FHA loan may not be a good option for someone buying in New York City who's looking to purchase in a co-op or a condo.
Properties need to go through a vetting process yearly to be approved for an FHA loan. Cooperatives and most condo buildings are not willing to subject themselves to this process.
HUD puts out a FHA-approved condominium list by county and city. The number of buildings are limited but may be worth it to you to check out.
Conventional 97 Loans
Conventional 97 loans are another traditional loan that has first-time buyers in mind.
These loans are done with only 3 percent down, all of which can be a gift from a friend or family member.
97 loans don’t require insurance up front, and PMI cancels after you reach 78% of your Loan-To-Value rate.
Like FHA loans, this loan type was created to make housing more doable for more families. It’s a good option to look into.
NY government-based programs for first-time buyers
New York City and State has created programs want to make purchasing a home in the city and state a viable option for its residents.
HomeFirst Downpayment Assistance can offer up to $40,000 towards the down payment in New York City based on the applicant's eligibility.
While this might not mean paying zero down, it can mean significantly decreasing the amount you would be responsible for.
The State of NY Mortgage Agency or SONYMA offers a number of programs that can ease the cash burden of purchasing a home.
Along with getting a mortgage with low interest rates, SONYMA even offers a down payment assistance program, which allows the applicant to borrow for down payment as well.
While the program can lend you up to 3% of the home purchase price, the deal-sweetener is that the loan is forgiven after 10 years.
Swap Properties
Let’s say you have a house, but you kind of hate it. You want to upgrade your life a little, you know? Swapping the house can be a way to get rid of the need for the down payment.
This is a great idea if you are dealing with a seller who wants to downsize their life, move to your location, or just get another property.
You also may want to sell off your current home to a real estate investor to afford the money down, if you still need a down payment.
Seller Financing
Believe it or not, some sellers really want their properties gone. Like, yesterday.
Whether it’s due to tax, problems at home, or just other interests they want to pursue, they will be very flexible when it comes to your payment plan.
Some might be so ready to sell, they’ll even offer to finance it for you.
Seller financing can be a lot more flexible, especially if you are willing to throw in services as an added bonus.
Though rare, you may be able to buy a home without a down payment through seller financing if you’re good at negotiating.
Rent-to-Own
Rent-to-own properties are getting increasingly common and offer a great “try before you buy” option. This gives you a lease for a home you want for a set amount of time.
At the end of the allotted time, you will be given the option to buy the house for yourself—often at a discounted rate.
Though contracts can vary wildly, most will set aside a portion of your rent towards a down payment for the home.
You will be responsible for maintenance and repairs during your lease, so it can get pricey.
Even so, it’s a good way to start on home ownership if you know what to look for and read the fine print.
Assume Seller Debt
Many sellers already have debts they want paid off, but they don’t want to lose their money doing it.
If you are willing to take out a bigger sum of money, you might be able to lower or get rid of a down payment by being willing to assume their debt at the end of the transaction.
It’s a long shot, but it works.
Government Backed Programs With 0% Down
There are certain opportunities that allow buyers to get homes for no money down that are given to us by good ol’ Uncle Sam. Here are some you might want to take a look at...
USDA Loans
If you’re looking to move out of the city or just buy a country home for the summer, a USDA loan may be what the doctor ordered.
These loans were designed to revitalize rural areas and get people interested in living out in the country.
These loans are offered at 0% money down, but you have to live in the country.
Thankfully, a low insurance rate and way lower costs than what you’d find in New York City will be perks to look forward to.
VA Loans
Did you spend time in the military? If so, you never have to worry about buying a home with no money down.
VA loans are available for all veterans and can give you a home without the need to put a single penny down. You also don’t need insurance on the loan, which can save you thousands per year.
You will have to pay a VA Funding fee of 2%, but that’s really nothing considering how much you’re saving compared to a typical loan.
Navy Federal Credit Union Financing
Another option for veterans that’s worth looking into is Navy Federal Credit Financing.
Members of this military-based credit union can often get loans that are 100% financed, no down payment necessary. Like VA Loans, PMI is not required on these loans.
The loan amounts you can qualify for here are also remarkable. Depending on your stats, you might be able to get a jumbo loan for as much as one million dollars. That’s not a bad look!
Dollar Homes
This isn’t a loan, per se, but it is a federal program that should be on your radar if you want to buy a house with no down payment. Dollar Homes are homes that are priced superbly under market value.
It’s in the government’s interest to get these homes sold.
They are homes that have not been sold for six months or more on the foreclosure market, as well as homes that were left abandoned by owners.
You will have to rehab them, but they’re so cheap, you might not need a loan at all.
Other Options
When there’s a will, there’s a way. This is even true if you’re looking to buy a home in New York City. Here are some options worth considering if you want to get a mortgage in the Big Apple without any money down.
Gap Loans
Also called “bridges,” these are loans you take out to cover a down payment for a home.
You then use the gap loan to pay down the money you need in order to get approved for a mortgage and buy the home you need.
These are very common among real estate investors and nonprofit organizations like, NHSNYC’s (Neighborhood Housing Services NYC) services even have a bureau to help you learn about using them for your own mortgage.
Heck, they'll will even finance one up to $65,000 if you have a good financial history!
Double Mortgage
If you are really strapped for cash, you might be able to get a second mortgage placed on the home.
This is known as Community Seconds, and can be accessed through several government and bank-owned properties.
That being said, this isn’t always the best choice for you.
Lender and Seller Credits
If a house has been on the market for a very long time, you might be able to get the lender or the seller to pay your down payment for you. This is known as a “lender credit” or a “seller credit.”
The money they’re paying actually comes out of the closing fees they were supposed to be paid. If they are that desperate to make sure they sell the home, it’s likely that they will be amenable to it.
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