With a variety of no down payment assistance programs available, the dream of homeownership might be closer than you think.

“Getting into a home with no down payment is absolutely possible, especially for first time homebuyers,” said Santa Clarita home loans officer Jilyn Crawford. “There are many options, with different sets of qualifications.” It’s easy to get preapproval for your mortgage online these days too.

We’ll give you the qualifiers up front: For all of the no down payment programs below, you need a credit score of 640 or higher — or 620+ if you’re a veteran — and there are household income limits that range from about $77,000 to $107,000. Also, you must use the home as your primary residence, meaning you cannot rent out the home.

“Don’t be discouraged if your credit score isn’t there yet,” Crawford said. “It can be easier to remedy than you think, and American Family Funding will share with you tips on how to increase a low credit score. With enough knowledge, and the number of errors currently on many borrowers’ credit reports, it is possible to increase your score!”

As an American Family Funding Mortgage Professional, Crawford loves the look of surprise on clients’ faces when they realize their dreams may become reality, so she created this easy-to-follow list of no down payment programs for aspiring homeowners.

“Keep in mind, as you read, some of these programs can be used together,” Crawford explained. “So you can use one to fulfill the down payment and another to cover the closing costs and even home repairs.”

1. Your Wish Is Granted [GSFA Platinum Program]

How It Works: The GSFA Platinum Program is a great one and includes a variety of options. Simply, it’s a grant you can use toward your down payment and/or closing costs, and you do not have to be a first time homebuyer to use it! The grant amount is 0% to 5% of the total loan amount, depending on your credit score, and the specific Platinum option you choose. The higher the grant amount, the higher the interest rate.

“For example, if you’re home loan is $100,000, you can qualify for up to $5,000 in grant funds,” Crawford explained. “And you don’t have to pay it back. This is one of my favorite loan assistance programs.”

A GSFA grant also can be combined with a Mortgage Credit Certificate, for qualifying first time homebuyers and veterans, as well as an FHA, VA, USDA and conventional loan. What does that mean? You can use the GSFA grant to cover closing costs or the down payment, and you can request a Seller Credit to cover your closing costs. A strategy like this one requires virtually nothing out of pocket. If you have a savings, keep it as an emergency fund.

To Qualify: For an FHA, VA or USDA loan, the household income limit is $84,295. For a conventional loan, the household income limit is $107,520.

While this program is not limited to first time homebuyers, making it great for a wide range of people, it does affect your interest rate.

“Depending on how much you take — 0%, 3% or 5% — the interest rate ranges from below market rate to slightly above market rate,” Crawford explained.

2. If You Crave Wide Open Spaces [USDA Loan]

How It Works: If you want to plant some roots in a rural area, as opposed to inside city limits, the U.S. Department of Agriculture would like to help you. A USDA loan is a zero down payment program, helping you save up front. There are three options for this program: a loan guarantee, a direct loan, and a home improvement loan and grant. Depending on which one you choose, you can have the added bonus of a low interest rate or a grant to fund home upgrades.

While the City of Santa Clarita is not a qualifying area, some outlying areas are eligible.

Additional Qualification: “There are income limits, depending on the county and the number of persons in the household,” Crawford said.

To see if the address you’re considering is located in an eligible rural area, as well as check income limits in your area, click here.

3. The Loan Bundle [Cal HFA Loans]

How It Works: The My Home “silent second” loan is a second loan that helps cover the cost of your down payment and closing costs. Offered by the California Housing Finance Agency (Cal HFA), the My Home loan is deferred, so you don’t have to pay it back until you sell, refinance or pay off the mortgage. This loan has a 3% accruing interest rate.

Additionally, there are two other Cal HFA loan assistance programs. For teachers and school employees, Cal HFA also offers the Extra Credit Teacher Home Purchase Program (ECTP) for first time homebuyers. The California Zero Interest Program (ZIP) can be used as a silent third loan to cover closing costs, as well.

“These loans are great when used together, like a package,” Crawford explained, “so you can get the maximum benefit from them.”

Additional Qualifications: The maximum debt-to-income ratio is 45%, and borrowers must complete homebuyer education counseling. Cal HFAs also have a range of income limits and property sales price limits. An ECTP loan is limited to teachers, administrators, school district employees and staff members working for any California K-12 public school, which includes Charter schools and county/continuation schools.

For more details about any of these no down payment assistance programs, click here.

Related Article: Teachers, Firefighters and Police Home Loan Discount

4. A Dollar-for-Dollar Tax Credit [Mortgage Credit Certificate]

How It Works: This one is great if you can afford the down payment up front but might be tight on cash later. The Mortgage Credit Certificate (MCC) takes a portion of the mortgage interest you would be paying and gives it back to you as a dollar-for-dollar tax credit. Cal HFA recommends using the credit toward future mortgage payments, to help ease the initial burden of homeownership.

“This adds to the borrower’s disposable income and reduces the debt-to-income ratio,” Crawford explained. “It also can be used to help you qualify for a mortgage if your debt-to-income ratio is too high.”

Most loan assistance programs require a 45% or lower debt-to-income ratio to qualify, and the MCC can help reduce your debt-to-income ratio and increase the loan amount you can qualify for, giving a little more wiggle room.

Additional Qualifications: You must be a U.S. citizen, as well as a first time homebuyer, unless you are a qualifying veteran or are located in a specially designated federal area. There are also sales price and income limits.

For a full list of requirements on this no down payment assistance program, click here.

5. Get By With A Little Help From A Friend [Gift Funds]

How It Works: With an FHA loan, 100% percent of your down payment and closing costs can be made up of gift funds from a family member, employer or other qualified donor. For a conventional loan, all of your down payment can come from gift funds, as long as the down payment covers 20% or more of the loan; if the down payment falls under 20%, the homebuyer has to contribute about 5%. Gift Funds also can be used toward closing and other costs related to the loan.

Additional Qualification: You cannot receive gift funds from someone who has a financial interest in the sale of the property, such as the seller, your real estate agent or your broker.

6. For Our Veterans [VA Loan]

How It Works: With a VA loan, the homebuyer can contribute no down payment up front, and the seller is even allowed to pay closing costs. As an added bonus, any excess Seller Credit that wasn’t used to cover closing costs can be used to pay off credit card debt — keeping the money in the veteran’s hands.

As mentioned above, veterans need a credit score of 620 or higher to qualifier, which is a bit friendlier than the average 640 credit score. A VA loan is not limited to first time homebuyers or even to a single use, as many veterans believe. It can be used over and over, and it can even be used for multiple properties if the active service member is transferred to a different duty station. As a bonus, a VA loan can be combined with a MCC or a Platinum Loan, as well.

Related Article: The Homebuying Process, Simplified

For more information on any of these no down payment assistance programs, please call American Family Funding at 661-284-1150, or visit affloans.com.

Santa Clarita home loan lender American Family Funding can help you fulfill your dream of home ownership. A highly rated Santa Clarita mortgage lender, American Family Funding maintains a focus on community involvement and a commitment to giving back whenever possible. Friendly mortgage brokers make the first time homebuyer experience an easy and stress-free experience — even with bad credit or no down payment. The Santa Clarita home loan officers at American Family Funding also specialize in VA loans, reverse mortgages, refinancing and the STAR Loan Program.

American Family Funding

28368 Constellation Road

Suite 398

Valencia, CA 91355

(661) 284-1150

info@affloans.com

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