What to know about the Zero Down mortgage program

• 1. Qualify with a credit score as low as 620

  A perfect credit score isn’t necessary when applying for a home loan. However, it can mean better loan terms. If you’re considering buying a home in the next few years, you can take action now and improve your credit score and chances of qualifying for a lower interest rate. If you have a low credit score, no credit score or credit history, your local Guild loan officer can still assist you on the path to homeownership.

• 2. No down payment is required

  Home affordability isn’t only measured by the size of how much you put down. If your income is enough to make your monthly mortgage payment, you have money set aside for common homebuying expenses, and you can comfortably meet your other living expenses, homeownership may be within reach.

• 3. You must occupy the home as your primary residence

  A primary residence is the main home where a person or family lives. It’s the place where you spend the majority of your time and where you receive mail and pay your bills. It’s different from a second or vacation home, a property you own but don’t use as your main residence.

• 4. Fixed-rate loan options only

  A fixed-rate mortgage has an interest rate that remains the same for the entire loan term, resulting in a fixed payment amount that will not change. Interest rates are locked up-front, allowing borrowers to predict their future payments accurately. Loan lengths vary, but the most common term is 30 years.

  Difference between a fixed-rate loan and an adjustable-rate mortgage

  The difference between a fixed-rate loan and an adjustable-rate mortgage (ARM) is that an ARM starts with an introductory fixed interest rate, then adjusts after the initial fixed interest rate period ends.

• 5. First-time and repeat homebuyers are eligible

  The Zero Down mortgage program isn’t just an option for borrowers who qualify as first-time homebuyers. This program is also available if you’ve previously owned a home.

The Zero Down mortgage program pairs a standard FHA first mortgage for up to 96.5 percent of the total purchase price plus second mortgage options for your down payment and/or closing costs. The second mortgage provides down payment assistance of three and a half or five percent of the purchase price as a repayable lien.

The same factors go into determining your interest rate for the Zero Down mortgage program as other loan types. The larger your down payment, the less of the total purchase price you’ll need to borrow. The less you borrow, the lower your LTV or loan-to-value ratio. The more you borrow, the higher your LTV, which can mean a higher interest rate.

There are considerations besides the interest rate when buying a home too. While the advantages of a larger down payment can include better mortgage terms, there’s a potential downside. When you weigh the costs of buying versus renting, buying now may be financially advantageous instead of waiting until you’ve saved more for an up-front payment. You also have the opportunity to start building equity in your home right away.

With each mortgage payment, you’re one step closer to owning your home. One of the main benefits of owning more equity in your home is that when you sell, your equity is given back to you in cash. The lender takes the remaining loan amount, and you take the rest, giving you more money back if you sell your home at a higher price than you paid.

Discussing all the costs and benefits of a loan program with your loan officer is always a good idea before deciding if it’s the right choice for you.

Widely available down payment assistance (DPA) programs are designed for homebuyers who can afford monthly mortgage payments but don’t have enough saved for a down payment. They’re available at the state or local government level or from other organizations that offer first-time homebuyers relief from the initial cost of purchasing a home.

In general, DPAs aren’t designed to be used with the Zero Down mortgage program because this program already allows borrowers to buy a home without making a down payment, so there’s no need for additional assistance with the down payment.

If you’re interested in an affordable mortgage, we’re excited to be your partner on the road to homeownership. Connect with a loan officer to review the steps to qualify and help find the loan that fits your life.