One zero down payment loan option is a VA loan. It is a government back loan by the United States Department of Veteran Affairs. VA loans provide flexible, low-interest mortgages for members of the U.S. military (active duty and veterans) and their families. VA loans do not require a down payment or PMI, and closing costs are generally capped and may be paid by the seller, which help you save even more money. However, a funding fee is charged on VA loans as a percentage of the loan amount to help offset the program's cost to taxpayers. This fee, as well as other closing costs, can be rolled into most VA loans or paid upfront at closing. A big plus for VA loan eligibility is that there is no income limitation. You can make one million dollars per year and still qualify for a VA loan.
Some of the pros of doing a VA loan besides the zero down payment option are:
- It helps you finance a home when you do not qualify for a conventional loan.
- Credit requirements are typically more relaxed.
- You do not need a large down payment.
- This type of loan is open to repeat and first-time buyers
Some cons of a VA loan that you need to consider are:
- Expect to pay mandatory mortgage insurance premiums that cannot be canceled on some loans.
- You will have higher overall borrowing costs.
- Expect to provide more documentation to prove eligibility.