How to secure a Home Loan with no down payment

Did you know? In India, most lenders finance up to 75% to 90% of a property's value through a home loan, leaving buyers to arrange the remaining 10% to 25% as a down payment. For many homeowners, this upfront cost is one of the biggest challenges in their home-buying journey.

But what if you can get a home loan with zero down payment? Although traditional banks cannot always offer such alternative funding methods can assist you buy a house with little to no initial cost. Let's understand if it's possible to secure a home loan with no down payment.

Understanding home loan down payment

Before diving into zero down payment home loans, it’s crucial to understand the concept of down payment.

• A home loan down payment is the initial amount a homebuyer pays upfront when purchasing a house.
• Typically, a homebuyer needs to pay 10% to 20% of the property value as a down payment.
• The remaining amount is funded through a home loan, which is repaid in the form of Equated Monthly Instalments (EMIs).

A higher home loan down payment reduces your loan burden and interest payments, but it can be challenging for many buyers to arrange this sum.

Is it possible to get a home loan with no down payment?

Yes, while traditional home loans require a minimum down payment for a home loan, there are various ways to finance 100% of your property’s value. Some strategies include:

Securing approval for a home loan with zero down payment

• Government scheme
  Various government schemes such as PMAY provide subsidies to reduce home loans and require no such down payment initially.
• Loan against existing assets
  Use assets such as gold, fixed deposits or properties to obtain a home loan. This can cover your savings without stressing your down payment.
• Builder Financing
  Some developers provide zero downpayment by adjusting it within the EMI structure. This allows you to start paying without any advance cost initially.
• Personal loans for down payment
  A personal loan can help to cover the repayment, but it comes with high interest rates. Make sure you have a repayment plan before choosing this.
• Co-borrowing or guarantor as support
  Applying for a home loan with a co-borrower or a guarantor can lead to zero down payment and increase chances of approval.

How to improve your eligibility for a no-down payment home loan?

Unlocking the dream of homeownership without a down payment.

• Keep a high credit score
  A credit score of over 750 improves your chances of obtaining loans with better conditions without paying any amount upfront. You should also pay the outstanding amount in time to maintain a strong score.
• A stable income
  Lenders prefer applicants with stable salaries or income, as it ensures smooth repayment capacity. Hence, a consistent job or business income leads to zero down payment initially.
• Reduce existing loans
  A low debt-to-income ratio suggests that you can manage the extra repayment of loans effectively. Paying outstanding credit card bills or existing loans can improve your eligibility.
• Apply with a co-borrower
  An economically strong co-borrower such as spouses or parents, improves the possibilities for approval of loans. Their income and credit history can help you qualify for high debt amounts.
• Choose a government-supported loan
  Schemes such as Pradhan Mantri Awas Yojana (PMAY) offer grants that reduce the advance costs. These programs are designed to make homeownership cheaper, especially for first-time buyers.

Pros and cons of a zero down payment home loan

Pros of a zero down payment home loan:

• No need for upfront savings, making homeownership more accessible.
• Faster access to homeownership, allowing you to move into your property sooner.
• More liquidity for other investments, as you don’t have to tie up funds in a down payment.

Cons of a zero down payment home loan:

• Higher loan amount leads to higher EMIs, making monthly payments more significant.
• Higher interest payments over time, as the loan amount is larger.
• May require additional collateral, increasing the risk for the borrower.

Wrapping Up

It can seem challenging to be the owner of a house without making a home loan down payment, but with the right approach, it is possible. However, it is important to evaluate the long-term financial impact and choose a repayment plan that fits your financial budget effectively.

If you're looking for the best home loan solutions with flexible financing options, IIFL Home Loans is here to help. Explore our tailored home loan offerings and find a plan that aligns with your financial goals. Ready to buy your dream home? Apply for a Home Loan with IIFL Home Loans today!