“More options than ever before now exist so that you to can realize your dream of owning your own home.”
When shopping for a Zero Down payment home loan you want to make sure to get the lowest interest rate, terms and fees available to you with this type of loan program scenario. You also want to make sure you have all the information necessary to make an informed decision. It is important that you examine your options thoroughly before you make a choice. Everyone has their own unique needs. There has been a virtual explosion of options available when considering using one hundred percent financing. The type of loan program you choose should be based on your current financial situation, the length of time you expect to live in the home and with keeping in mind your overall financial plan for the future. In thinking about and choosing a zero down payment home loan consider these important issues:
1. Consider how you want to structure your financing
A zero down program can be structured using a combination of loan programs or by using a single loan program. For example, some lenders will allow a borrower to use a single loan program and finance the entire loan amount in a first mortgage. Other zero down programs structure the financing typically using two loans. For example, you might choose an 80% loan to value first mortgage and then a 20% loan to value second mortgage. Other loan packages can have different combinations such as a 90% loan to value first mortgage and a 10% loan to value second mortgage. Every one of these scenarios presents different financial decisions. You need to ask your mortgage broker, for example, if private mortgage insurance will apply if you have a first mortgage of greater than 80%. You also will need to consider the interest rates offered with each program to see what will give you the lowest monthly payment if that issue is of utmost importance to you. Private mortgage insurance often applies in zero down payment programs so be sure to talk to your mortgage broker about this issue.
2. Consider how your credit score will affect the types of Zero Down programs available to you
It is true that with so many different loan programs available most employed people without serious past credit issues (i.e., foreclosures, repossessions) can obtain zero down payment home loan financing. The cost of many of these programs will vary based on your overall credit score, that is, how much of a credit risk you statistically represent to the lender. Obviously, lenders are willing to take greater risks in lending money to people with good histories of prompt and responsible payback. It may cost more in interest rate to obtain zero down if your credit score is not superior. The good news is that a wide range of credit score histories qualify for zero down financing. In fact, in some cases, even with little credit history zero down is still possible.
3. Consider your motives for using Zero Down
If you have an excellent income and have been unable to save money for some reason in your recent financial past or you are just starting out in life, make an excellent income, but have not yet had time to save, then zero down may be an excellent alternative for you rather than waiting a year or two to save for a down payment. Perhaps your situation is such that you have been able to save moderately and can afford to pay for buyer’s closing costs, however, do not have enough put away for both a down payment and closing costs, zero down will allow you to buy a home now, enjoy the benefits of home ownership and enjoy potential appreciation over time.
4. Be sure to consult with your Mortgage Professional, your financial situation may be better than you think!
Many people are under the false assumption they can not buy a home because they have been unable to save for a down payment. One key factor to remember is that there are so many new loan programs available that often times a zero down program can be developed for your specific needs and get you into a home right now. There are even “alternative credit” and grant programs that you may possibly qualify for in your particular circumstances.
5. Consider Seller Assistance
On excellent way to structure a zero down payment home loan is to have the seller of the home pay for your down payment and closing costs. For example, you could finance 95% of the transaction, have the seller contribute the other 5% and also pay your closing costs, essentially putting you in a position to get into a home for zero down payment and zero closing costs. Market conditions in your local marketplace will determine if this plan is a viable alternative.
6. Remember Zero Down does not mean FREE
Every home buyer is usually faced with two expenses when buying a home. As a buyer you need some cash for the down payment, which of course becomes part of your home’s equity unless you finance one hundred percent. There are also just the costs of “doing business” as a buyer and these costs are call closing costs. Closing costs may include the cost of obtaining your financing, insurance and other pre-paid expenses. As a buyer your closing costs usually are approximated at 2.5% to 3% of purchase price. Remember to figure in these costs when you think about buying a home.
7. Consider looking into special programs like VA Financing
If you are a veteran looking to buy your first primary residence you can use your GI Bill to essentially get into a home for next to no out of pocket expense. There may be other special funding programs you may qualify for through special interest groups to which you belong. Be sure to do your research.
8. Make sure you get a written Good Faith Estimate so you know all of the costs involved in your mortgage program
No matter with whom you are working, you should get a Good Faith Estimate of your costs. Be sure you go over this document carefully, especially in any loan program that may have special circumstances like mortgage insurance which can be the case with a zero down loan.
Make an educated and informed decision, this is serious business
Mortgage regulations have changed significantly over the last few years, making your options wider than ever. Subtle changes in the way you approach mortgage shopping and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of expense.
Get the Right Information
Whether you are about to buy your first home, or are planning to make a move to your next home, it is critical that you be informed about the factors involved.
