One of the biggest considerations for homebuyers when they start the home-buying process is the down payment—or the amount of money you pay upfront when buying a home. Budgeting for a down payment you can afford and knowing how long you need to save is important. But there are many options that can make achieving home ownership more attainable, including a no down payment mortgage. A no down payment mortgage is a mortgage where you are able to finance the full value of the home you want to buy. Wondering if a no down payment mortgage might be a good fit for you? Here is what you need to know.

What is a No Down Payment Mortgage?

Many mortgages require a down payment—typically between 3 percent and 20 percent of the cost of the home. A no down payment mortgage (also known as a 0% down payment mortgage) is a type of home loan that allows you to finance up to 100% of the home’s value. If your lender requires closing costs, you will need to pay those, but with a no down payment mortgage, you will owe significantly less money upfront with the purchase of your home. 

What Are the Benefits of a No Down Payment Mortgage?

A no down payment mortgage may be a good option for those who are first-time home buyers, borrowers rebuilding their savings after major life events (such as divorce or relocation), or those who may have limited savings. 

Here are the benefits of a no down payment mortgage:

  • Achieve Home Ownership Faster: You have the opportunity to own a home sooner, since you will not have to save for a down payment. 
  • Build Savings: You can continue to let your savings grow, since you will not have to pay a large sum upfront with your home purchase 
  • Build Equity: Rather than paying rent, you can start using your monthly payments to build equity in your home as a homeowner.

What Are the Potential Drawbacks of a No Down Payment Mortgage?

Typically, with a no down payment mortgage, you may be required by your lender to have private mortgage insurance, or PMI. PMI is a type of mortgage insurance that protects lenders against loss if borrowers do not make their loan payments, and typically borrowers pay between 0.2 percent and 2 percent of the loan amount per year in PMI. PMI is typically arranged by your lender and often the premium for your PMI is paid monthly in addition to your mortgage payment.

PMI can be a relatively small trade-off when considering the ability to buy a home sooner with little to no down payment and keeping your cash flow for other priorities. And since there is no need to spend your entire savings on a downpayment, you can continue to grow savings more quickly.

How Do I Apply for a No Down Payment Mortgage? 

You can apply for a no down payment mortgage with a credit union or bank that offers this type of mortgage loan. When applying for a loan, always verify with the lender what information needs to be provided. Some lenders may require more information. Common information needed when applying for a no down payment mortgage can include: employment history, proof of income, assets, debt history, credit history, and property information. Do note your lender may require you to get an escrow account. An escrow account is used to pay for property taxes, property insurance and other property related expenses. 

Where Can I Get a No Down Payment Mortgage?

Many credit unions and banks offer no downpayment mortgages. Always take the time to research your lending options and see what loan may best suit your situation. CU1 offers no downpayment mortgages and can assist with your lending needs. You can start your application online or in branch.