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Navy Federal Credit Union Homebuyers’ Choice No Money Down Loan Explained

This post may contain affiliate links. Click here to read my full disclosure.

If you want to learn how to buy a house with no money down in 2021 using Navy Federal Credit Union, check this out!

Navy Fed offers a Homebuyer’s Choice Home Loan and requires NO PMI!

Navy Federal offers a no money down conventional home loan. It’s an affordable home loan for first time home buyers and those looking to keep their emergency fund and savings in place.

But you don’t have to be a first time buyer in order to qualify for this mortgage!

The best part is you also don’t have to be an active duty or retired military service member in order to join Navy Federal Credit Union. Check out membership eligible and requirements below.

Can Non Military Join Navy Federal Credit Union? 

Per Navy Fed’s website, the following groups are eligible for membership with the credit union:

Active Duty, Retired & Veterans

Service members in all branches of the armed forces are eligible for membership. This category includes:

  • Active Duty members of the Army, Marine Corps, Navy, Air Force, Coast Guard, National Guard and Space Force
  • Delayed Entry Program (DEP)
  • DoD Officer Candidate/ROTC
  • DoD Reservists
  • Veterans, retirees and annuitants

Department of Defense Civilians

Navy Federal’s field of membership also covers DoD civilian personnel, who support our armed forces. This category includes:

  • DoD civilian employees
  • U.S. Government employees assigned to DoD installations
  • DoD contractors assigned to U.S. Government installations
  • DoD civilian retirees and annuitants

Minor Membership

If you’re an existing member and a parent, grandparent or guardian of a minor, sign in and share the gift of membership using our online minor membership application. Minor membership is open to:

  • Children (including adopted and stepchildren)
  • Grandchildren

Navy Federal Friends and Family Referral 2021

Family Members

Immediate family members include:

  • Parents
  • Grandparents
  • Spouses
  • Siblings
  • Children (including adopted and stepchildren)
  • Grandchildren
  • Household members

The easiest way to join the credit union is to walk into a branch with a valid form of ID (driver’s license, passport, etc). You do not need your family member’s DD-214 or military ID. You simply need their name and branch of service.

How to Buy a House with No Money Down – HomeBuyers Choice Loan

Most conventional mortgages require a minimum of 5% down (20% in order to avoid paying private mortgage insurance) which I’ll refer to as PMI throughout this article. 

What is PMI?

PMI is insurance that protects the mortgage lender (or financial institution) in case the buyer (you) defaults. So if you lose your job and can’t afford to pay the mortgage payments, and the home is foreclosed on, the lender doesn’t suffer a massive loss like you do. 

If you can’t afford to put down at least 20% on the home loan, you’ll have to pay private mortgage insurance, which will be added to your monthly mortgage payment until you reach that 20% equity in your home.

PMI rates are based on several factors including credit score, so no two loans can be compared and there is no “average funding fee” per loan.

Navy Federal Credit Union’s HomeBuyers Choice mortgage offers a loan with no down payment and NO PMI! This is HUGE because an FHA loan (which requires 3.5% down) has astronomical PMI. 

To give you an idea of how much money this could save you, my husband and I purchased our first home together in Georgia for $160,000. Of our $1300/month mortgage payment (rates were higher at the time), $180 per month was going to PMI.

That’s a huge amount to pay over the course of several years while paying down the principal balance!

But there is a catch! You have to pay a funding fee (similar to fees for USDA and VA loans).

What is a Mortgage Funding Fee?

Simply put, this fee is a lot like PMI, but you pay it upfront at the time of funding the loan. This fee is required for VA loans and USDA loans (which are also zero down loan programs). 

Navy Federal Credit Union’s HomeBuyers Choice funding fee is 1.75% of the purchase price. A few facts about it:

  • It can be added to the loan and paid over the term (obviously you’ll pay interest on top of the fee itself). This is great if you’re low on funds to close.
  • It can be paid upfront at closing by the buyer.
  • It can be waived with at least 3% down payment! This is an incredible benefit, so if you can afford to go this route, that’s what I recommend.

Closing Costs for HomeBuyers Choice Mortgage

Navy Federal mortgage lenders were easy to speak to over the phone. I called on 3 different occasions to ask questions about the program, and they were very informative.

The closing costs can be paid by the buyer, but what’s awesome is that the seller can contribute up to 6% towards closing costs on this home loan. 

That means if you are buying a $250,000 home, the seller could (if negotiated by you and your Realtor®) pay up to $15,000 towards your closing costs and you might not have to come out of pocket anything at the closing table!

Navy Federal Credit Union Mortgage Credit Score Requirements

There are a few things I couldn’t get a clear answer on. Credit score requirements was one of those. Navy Federal manually underwrites all of its mortgages. 

That means it has a dedicated team of underwriters to look over several compensating factors, like employment history, compensation, debt to income ratio, credit score, and cash reserves available for emergencies.

According to BankRate, Navy Federal requires a 620 credit score to qualify for a home loan, but again…those compensating factors matter.

Navy Federal HomeBuyers Choice DTI Requirements

Because my husband and I paid off $63,000 in debt last year, our debt to income ratio is very low, but I couldn’t get a clear answer from Navy Federal on this.

Oftentimes, lenders follow Fannie Mae or Freddie Mac guidelines with regards to debt to income.

What is Debt to Income? And How to Calculate It?

Your debt to income is literally debt divided by income. So if you have a car payment of $450 and a mortgage of $1200, you’d add those two payments together $1200 + $450 = $1650. Then divide that number by your gross monthly income. 

If you earn $60,000 per year, or $5,000 per month, your debt divided by income is $1650/$5000=33%.

Having a total DTI of less  than 46% total is ideal, and there are housing DTI requirements as well. Again…I couldn’t get a clear answer on this because each loan and borrower’s circumstances are different.

Navy Federal HomeBuyers Choice Reviews

I scoured the internet when I first learned about this mortgage to try to find reviews and aside from a few Reddit posts, I couldn’t find much. My husband and I are currently preapproved for a HomeBuyers Choice home loan, and I’ll update this post when we’ve found a home and closed.

Bottom Line – Navy Federal’s No Money Down Loan is Legit

This post is not sponsored in any way by Navy Federal. I just moved to the Florida panhandle, a largely military area, and upon research, I believe this to be one of the best loan programs available. 

As a former Realtor® and banker, I see the value in saving money at the closing table (especially if you’re looking to keep your emergency fund savings intact and not drain it in order to become a homeowner). 

How Can I Join Navy Federal Credit Union Online?

Visit Navy Federal’s website and click Become a Member.



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