Buying a Home with $0 Down Revealed Here! Yes You Can…
A no money down mortgage was much more common in the days before the recession hit, but some lenders still offer them. Only those buyers with the best credit history are considered and they have to have a good income. But, for those who qualify, it is a great way for people to get into a home and find the stability that homeownership can provide.
Some mortgages, those backed by FHA, want you to put down at least 3.5% of the home value as your down payment along with making mortgage insurance payments during the full term of the loan. Other lenders want even more, up to 10 – 20%. The higher down payment mortgages do not require insurance, so though there is more due up front, the overall cost is lower.
You may be wondering what is necessary to obtain one of those zero down loans. A good credit score is a start. Lending institutions typically require 700 or higher. You will need to have a proven track record of making all of your payments on time and in full. A work history of at least two years with steady income is also a must, and your income needs to be sufficient to afford a home along with all of your other expenses. It is this screening process that makes these loans possible.
You can also apply a gift from your parents, grandparents, or other relatives as your initial down payment, meaning you do not have any out of pocket expenses to account for, so long as you are buying a home for just you and your family to live in. The seller may also take care of the mortgage insurance payment for you, typically valued at 1.75% of the total amount of the value of the home. The cost of the house may be higher as a result, but you will have that payment all taken care of.
The Dream is Alive and Well!
One big institution offering no money down mortgages is the Veterans Administration. Veterans who qualify can get a zero down mortgage without getting a gift from a relative or taking out expensive mortgage insurance. The VA does assess a funding fee, typically 2.15%, which can be financed over the life of the loan.
Closing costs might be covered by the seller if your agent can successfully negotiate it, saving you more in the initial part of the VA loan process. You can also apply a gift for the closing costs if you so choose. Either way, you are basically getting to move in without having to put together any cash payments to close.
Veterans with good credit and who meet the income requirements are eligible for applying for these loans. They are expected to have a certain debt to income ratio and an amount each month left over after all bills, including the mortgage, are paid. A full home inspection including an insect check is usually also a requirement.
Finally, you can qualify for a zero down mortgage if you are purchasing a home from a family member. The familial relationship allows a special kind of down payment to be made, called a gift of equity. It is paid out of the proceeds of the sale as a gift. You can also avoid having to take out any mortgage insurance in one of these types of loans. The danger of buying a home from a relative is that you do actually know the seller. In most arrangements, there isn’t an emotional connection between the buyer and seller, but when buying from a relative, there can be an added layer of stress that isn’t present in other transactions.
As you can see, there are a few types of no money down mortgages you can apply for. The best part is, they are all relatively safe and free from the pitfalls that plagued lenders before the recession. A zero down loan gives you the ability to get a home you love with payments that fit your budget.
Buying a Home with No Money Down is Possible
