Program costs and closing costs may be negotiated into the list price of the home (in which case the seller would be making a concession and taking less money for the home) or added to the price (in which case the seller would be receiving full price for the home and the buyer would effectively be financing the down payment and the closing costs). The cost of the 0% down program ranges to up to 1% of the purchase price of the home.

Pros:

You don't need to take any money out-of-pocket for this program. It may also get you in to a home now instead of risking that the home will be even more expensive once you manage to save up a down payment. If the cost of a home in your desired neighborhood is increasing by 8% a year, then waiting only 6 months to buy that $180,000 home could cost you $7,200. The cost of financing your down payment seems minimal from this standpoint.

Cons:

You still must qualify for the higher purchase price of the home. For instance, if you qualify for a $180,000 home, (to err on the conservative side) you will need to shop for a home priced around $165,000, so you can then add your 3% down payment, program costs, and an estimated 3% in closing costs to the purchase price of the home. Remember, program costs vary from a fixed amount (around $900) to 1% of the purchase price. That is how much you'll pay to finance (and have the honor of paying interest on) your 3% down payment.

Sample Zero-Down Program: The Nehemiah Program
Nehemiah is a charitable organization that provides money to qualified buyers, helping them purchase a home. When you qualify as a Nehemiah Buyer, you can receive a gift of up to 3% of the purchase price of a participating home, to be used toward the required down payment and closing costs, and you never have to repay the gift.

This program is available to all buyers who qualify - not just first-time home buyers. There are no income restrictions, no asset limitations, and no geographic restrictions. The property must meet or exceed FHA guidelines and requirements as well as Nehemiah requirements.

In addition, the seller must supply the buyer with a two-year roof certification and a one-year home warranty. The seller must also enter into an agreement with Nehemiah stating that the property will meet or exceed the above-mentioned items. The Participating Home Agreement also outlines the contribution the seller makes to Nehemiah and its use (4% of the purchase price).

What you need to do:

1. Qualify for an eligible loan program (such as FHA)
2. Complete the Nehemiah on-line Home Ownership Counseling Course
3. Have a minimum of 1% of the purchase price in reserves or in the transaction

Your Realtor is Your Navigator
These programs need an experienced Realtor to help put them together correctly as the home needs to appraise at the higher price and the listing may need to be changed to the higher price, or the underwriter may throw up red flags. In our experience - if the process is done correctly - the home normally appraises at the higher price and these loans are usually approved.