How to Buy a House With Little to No Money

Wondering how much money you need to buy a house? It’s no longer true that you need 20% for a deposit. Here’s what you need to know.

A house with dollar bills coming out of the chimney.

It’s harder than ever to buy a house right now.

It’s not just coming up with the money. (Although, as we’re gonna cover in this article, there are ways of buying a house with little to no money up front.)

It’s also about knowing how to even go through the process itself. Home-buying knowledge sometimes gets passed down through the generations, but not always. Damn sure won’t learn about it in school either.

So this leaves many people as the Kourtney in this TikTok.

So we’re gonna break the whole process down. With explainers on the basics, like what a mortgage down payment is. Obvi, we’re not financial experts, but we have pulled together information from people who are.

Experts like Aleigha of Pondst Financial, who has a degree in financial math. She summarizes how you buy a house with little to no money in this super helpful video she shared with Cleo 💙

Aleigha explains, “You are able to put down a house with 3.5 down with an FHA loan. You can still buy a house that you can comfortably afford [instead of] saving up 20% for a down payment.”

OK, so. It’s possible. Here’s a step-by-step of what this means.

What is a mortgage down payment?

A down payment is the first payment you make towards buying a home. Lenders usually calculate your down payment as a percentage of the total amount you borrow.

So for example, if you buy a home for $200,000 and you have a 20% down payment, you’ll need to bring $40,000 to the table [cries in generational wealth].

However, as Aleigha explains, there are ways to buy a house without a huge down payment.

What do you need to qualify to buy a house without a down payment?

With no down payment, the way to get a mortgage through the major mortgage investors is if you take out a government-backed loan.

Government-backed loans are insured by the federal government.

The government offers guaranteed loans for people who need financial assistance when buying a home. Government-backed loans are less risky for the loan provider, and they can expand their usual loan criteria to people who might not, for example, be able to afford a down payment.

An FHA loan, that Aleigha mentions, is one of these.

What is an FHA in real estate?

FHA loans are loans for people who have low to moderate income, backed by the Federal Housing Administration.

Out of all of the options available to people on low incomes, FHA loans have the fewest requirements.

These requirements include:

💙 You must plan to live in the property you’re buying as your primary residence,

💙 Buy a home that meets livability standards,

💙 and move in within 60 days of closing.

What credit score is needed to buy a house this way?

FHA loans are also a viable option if you have a low credit score. You need a credit score of 580 to get an FHA loan combined with a lower down payment.

If your credit score is lower than 580, you’ll have to make up for it with a larger down payment.

Whatever you decide is best for you, it’s always good to improve your credit score.

If it is the credit building thing you’re after, check out Cleo Builder.

It’s literally designed to help you work on your credit score.

Just download the app and type “Credit Builder” to Cleo. If you’re not super excited by this, you can still use the app for budgeting, for free.

Enjoy this post? Def give it a share or send it along to a friend. You never know, it could make a big difference.

Big love. Cleo 💙

Still have questions? Find answers below.
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