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How To Buy A Home With No Down Payment

Updated: Mar 24, 2021

Have you ever wondered how to buy a home if you have no down payment? Or if it's even possible to purchase a house without a down payment?

Well keep reading to find out how!

One of the most common reasons why someone cannot buy a home is because of the down payment. I want to share with you how you can still buy a home by borrowing the down payment in addition to your mortgage. This is called a flex-down mortgage. It’s a program mainly for first time home buyers but it is also available to other people as well. Not many lenders offer this and I want to share with you some tips on how to qualify for this mortgage program.

#1 - You need an above average credit score

To give you a better understanding of credit score, the highest score you can achieve is 900 and the average Canadian credit score is around 650. You’ll need a score of at least 680. If you don’t know what your score is, contact me and we figure that out together.

#2 - Borrowing your down payment:

You still need a downpayment but the source of it can come from borrowed sources. The best source is to draw from your line of credit. It offers the lowest rate and the best part is you don’t need to pay any interest if you’re not using it. Try to go to several banks to be approved for a line of credit so that you can maximize your credit limit. If you still need more down payment, you can use your credit card as well. Just a heads up, the rate will be much however at around 20% so only use it if you really need to.

#3 - Closing costs

What you’ll need is at least 1.50% of the purchase price in cash to cover closing costs. For example, if you are looking at a place for $500,000, you’ll need at least $7,500 in cash available. The most expensive closing cost will be the property transfer tax. You have to have cash on hand to pay for this tax or else the transaction will not go through. If you want a good estimate of what your actual closing cost will be, we can definitely calculate that together.

#4 - Lastly, you need sufficient income.

You’ll need an above average income to qualify for this program because all the lines of credit and other debts you’re using for the down payment will be added towards your debts. Just to give you an idea, I worked with a client who used this program to purchase a $600,000 home. They borrowed their down payment and they had a combined income of around $175k. That is the ballpark income that you’ll need in order to qualify.

If you'd like to learn more on how we can help you, don't hesitate to contact us here!

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