No Money Down is Still Possible!
In most housing markets across the nation, the decrease in housing prices is helping to make homes more affordable for the average family.
The problem is most Americans have a hard time saving enough money for an adequate down payment on a house in today’s credit market and are left with only no money down home loans as an option.
In an ideal world, mortgage companies and banks would prefer applicants who have a down payment of at least 3.5% (FHA) and preferably 20 percent, in addition to the amount you will need for closing costs.
Regrettably, this is happening less and less as consumers continue to spend not only what they are currently making, but also future earnings.
The amount of homebuyers who are looking to take advantage of the zero down home loan has been increasing at an alarming rate.
How do Zero Down Home Loans Work?
Luckily, most mortgage companies realize how tough it is to save for a down payment these days (2013) and have created unique loan programs that make it feasible to purchase a home with little or no out-of-pocket expense.
Generally the larger the down payment you have the better the risk for the bank, as your LTV or loan-to-value is lower giving you a lower perceived risk.
There are many options for a borrower with good credit and no money for a down payment. For instance, some mortgage lenders offer what is called the 80/20 no money down loan (if you can get the seller to pay closing costs).
This involves offering a first mortgage for 80% of the asking price, and a second home equity loan for the remaining 20%. This can be a wonderful choice if found through a quality lender, as home buyers will avoid paying very expensive PMI (private mortgage insurance).
Home buyers can also obtain a mortgage loan for 103% of the asking price or the final appraised value. This is advantageous as it allows borrowers the ability to not only put no money down on their dream home, but they are able to finance all of the closing costs into the loan.
How do I Find One?
If you are looking to purchase a home with no money down, contact a mortgage broker as they will often be a better choice over that of a standard bank as the programs available to them are generally more varied.
There are several loan programs which offer the zero down loan option, but you must be prepared to look for them and work through any obstacles that arise with your mortgage broker as these are getting harder and harder to find.
Your best chance in 2013 for getting a no money down loan are:
- Va Loan – If you’ve served our armed forces check to see if you’re eligible
- Department of Agriculture (USDA) – Part of the RHS or Rural Housing Program. These USDA programs are far from just for farms, millions of homes are available for these 100% loans
- Navy Federal Credit Union – 100% loans and just about anyone can join if they’re creative – Including household members & step kids of the military
Mortgage brokers have access to a huge array of loans which are most often carried by private money lenders, FHA programs, VA Programs, sub-prime lenders, etc.
Meeting the qualifications for these loans can be difficult, but well worth it in the end for many future homeowners.