Zero Down Home Loan Options

I recently received this question from one of our Equifax Personal Finance Blog visitors:

Q: My husband and I have been having serious marital issues since 2005, and we can’t seem to repair our problems. One problem we can’t agree on is the purchase of a home.

I am trying to purchase a HUD home. My husband is a veteran. We talked to the VA Mortgage Center, and they prequalified us for a loan, based on our completing the loan application. My husband is refusing to cooperate.

Can I qualify for or use his VA benefit to obtain a loan? Are there any options or rights that protect me? He has always controlled the finances, and I have no access to them. He’s been threatening me with divorce for the last two years.

I applied for Social Security disability in November 2005 and was partially approved in May 2009. I received my first disability check at the end of November 2009, and my income is $1,907 per month that is automatically deposited into my bank account. I have been working on paying down old debts, current medical bills, car insurance, and a few other expenses.

Any suggestions or options that you can provide me would be most appreciated.

A: Qualified veterans are eligible to take advantage of a VA loan, which is backed by the full faith and credit of the federal government through the Department of Veterans Affairs.

As I wrote in my book Buy, Close, Move In!, “The VA housing guarantee of 25 percent (the government assumes payment of the top 25 percent of the mortgage in case of default) protects the lender should the veteran default on the mortgage, and allows the veteran to finance up to 100 percent of the purchase price, as long as the property falls within the price limits for the county set by the VA.”

VA loans are available only to those who have served at least 90 days on active duty during wartime service. In addition, you must have served at least 181 days of continuous service during peacetime and been discharged with something other than dishonorable conditions. For more information about eligibility requirements, go to the VA website.

Spouses of veterans do not qualify on their own for VA housing benefits. You will qualify for a VA loan only if you purchase a house with your husband.

How can you qualify to purchase a home on your own? It appears that you have your own income of nearly $2,000 per month, so you should be able to qualify. If you don’t have cash for a down payment, there are several other ways you might still be able to purchase your own home:

FHA’s $100 Down Payment Incentive program. If you buy a HUD home (which is an FHA foreclosure), you can put down as little as $100 to purchase your property. There are other HUD programs in the works that will allow you to purchase your home for between zero and $1,000 down. Find out more at HUD.gov’s “Buy a Home” page.
The USDA Rural Development Direct Loan program. The U.S. Department of Agriculture offers a true zero-down payment program called the Rural Housing Direct Loan, which is also known as a Section 502 Direct Loan. It is a true 100 percent financing product that doesn’t require private mortgage insurance (PMI). However, there are income, debt, and location requirements, and these loans also have terms that run up to thirty-eight years, depending on the borrower’s income and debt.
Local first-time home buyer down payment programs. To find these programs, go to any search engine and type in the name of your city and “first-time home buyer down payment.” The results will lead you to a list of local home buyer agencies with various programs.

The question you have to ask yourself is what are you going to do about your relationship?
If the problems in your marriage are insurmountable, and you are going to get divorced, you should wait to purchase your home until after you and your husband are divorced. It will be much tougher for you to purchase a home by yourself while you are married and then later try to separate the asset from your marital assets.

Instead, while you’re working through your options, you should think about investigating how you will purchase the home and finding the real estate professionals you’ll need to help you achieve your goal. You’ll also need to learn how to manage the money you do have and will receive from your spouse

There’s a lot of planning you can do while you figure out what’s going on with your personal relationship.

Good luck.

Ilyce Glink is a best-selling author, real estate columnist, and web series host. She is the managing editor of the Equifax Finance Blog and CEO of Think Glink Media. Follow her on Twitter: @Glink

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