Zero Down
The report will provide this important information:
- Glossary of critical terms
- Pertinent facts about home ownership
- How you can qualify for a ZERO down mortgage
- How you can qualify for a 3% down mortgage
- Value of the home for which you can qualify
Glossary of Critical Terms
Closing Costs—These are costs which are not controlled by the lender and are required for anyone purchasing a home regardless of loan amount or lender. These include expenses such as attorney fees, title insurance, survey, recording fees, appraisal, and termite inspection. All of these services are provided by independent professionals who are not affiliated with your lender. You can usually figure on your closing costs being approximately 1 to 1½ percent of your loan amount.
Conventional Loan—A loan that may or may not require Private Mortgage Insurance. (Any loan amount with 20% or more down payment will not require PMI. Any loan amount with zero or 3 to 19% down payment will require PMI without the careful planning of a mortgage consultant.) This type of loan is subject to the qualifying guidelines set forth by FNMA (Fannie Mae) or FHLMC (Freddy Mac).
Credit History—This is a “snapshot” of your past and present debt, current available credit, and a rating of your debt repayment history. This is very important to a lender so that they can know if you are a good credit risk.
Down Payment—The difference between the loan amount and the sales price of the home you are purchasing. This is measured in a percentage; for example, a 3% down payment on a $70,000 home would be $2,100.
FHA Loan—A loan that is insured by the Federal Housing Authority. This loan is geared toward providing mortgages for moderate to low income families and is subject to the qualifying guide lines set forth by the Federal Housing Authority.
Interest Rate—The percentage of interest charged on the amount of money borrowed. This rate will vary slightly from lender to lender and will vary according to the type of mortgage chosen (30 year fixed, 3 year adjustable, etc.). Now is an excellent time for mortgage interest rates as 1996 has ushered in consistently dropping rates that are the lowest in over 30 years!
Mortgage Broker—A mortgage broker is different from a single lender/bank in that he represents many different lenders in much the same way a travel agent represents many different airlines. Most people don’t call a single airline and expect to get a complete picture of all available flights and prices, and yet some people will call a single lender/bank and end up choosing the wrong type of financing which can literally cost them thousands of dollars. A mortgage broker’s knowledge and complete view of all financing options can enable people with low income, self-employment, commissioned income, or even credit problems to obtain excellent financing. A mortgage broker’s compensation as your consultant (much the same as a travel agent) is a finders fee paid by the lender. These lenders always offer better rates and superior prepayment privileges and often shave as much as a half percent point off the normal market rate.
Pre-Paid Costs—These are the costs that cover your escrow account for the future payment of interest, property taxes, and homeowners insurance. Property taxes are set by the appropriate government taxing authority and, unfortunately, are not negotiable. Depending on the regulatory agency, (FHA, Fannie Mae, etc.), you will be required to pre-pay anywhere from 2 to 11 months of property taxes at closing. Premiums for homeowners insurance are set by the insurance company you select, and you are required to pay your first year homeowners’ insurance plus two additional months at closing. You can usually figure on your pre-paid costs being approximately 1 to 1½ percent of your loan amount.
Private Mortgage Insurance—This insurance is required for most loans that have a down payment of 20% or less. Private Mortgage Insurance insures the lender in the event that you default on your mortgage payment and the lender is forced to sell your property at a loss.
VA Loan—A loan that is insured by the Department of Veteran’s Affairs. This type of loan is available only to veterans and is subject to the qualifying guidelines set forth by the Department of Veteran’s Affairs.
Most people who rent can actually afford to buy their own homes. So what’s stopping them?!?
Many tenants believe that owning a home requires a big down payment. They find it difficult to save for this while continuing to pay regular monthly bills. Others are convinced they can’t qualify for a mortgage—that even if they did qualify, the payments would be too large. Almost everyone is overwhelmed by the legal and financial red tape they believe surrounds the purchase of a home. So, the easy way out is to just keep paying rent! If you see yourself in any of these situations, here are a few facts that can change your mind:
Most people actually qualify for a 3% down mortgage but don’t realize it. Some people can actually qualify for a ZERO down payment mortgage!
The average mortgage payment costs about the same as the average rent payment. For example, if you are paying rent of $650 per month, you could be paying that amount toward owning a home of your own worth $77,500. This home would probably provide more space and privacy than what you now have.
When a survey of renters was conducted, 77 percent said that the biggest reason they don’t even check into owning their own home is their fear of feeling obligated to buy—or worse, being hounded by salespeople.
How can I qualify for a ZERO down payment mortgage?
FHA Loans
An FHA Loan is geared toward first-time homebuyers with a goal of assisting moderate to low-income families into homes of their own by providing incredibly reasonable and achievable mortgages.
This type of loan is officially considered a 3% down mortgage; however, your down payment, closing costs, and pre-paid costs can come from a gift, another secured loan, a retirement fund, an investment or 401K, or any number of approved sources apart from your pocketbook!
To qualify you need:
2 years of steady employment in the same field of work.
clean credit report for 1 year, but you can have credit problems from the past.
clean credit report for 2 years following a Chapter 7 Bankruptcy.
clean credit report, but can even be in the process of a Chapter 13 Bankruptcy.
VA Loans
A VA Loan is available only to veterans and is geared toward providing modest housing for individuals with moderate to low incomes.
This is truly a ZERO down payment mortgage. The loan amount
is 100% of the sales price of your new home, plus the VA funding
fee—the loan amount is actually slightly higher than the
price of the home! Closing costs and pre-paid costs can come
from a gift, another secured loan, a retirement fund, an investment
or 401K, or any number of
approved sources. In most cases, the seller will pay closing
costs and pre-paids. Now, why on earth would they do that? When
the price of the home can be adjusted, it actually doesn’t
cost the seller anything. For example, if you are looking at
a home that is listed at $65,000 but is actually appraised to
be worth $68,000, then you can purchase the home for $68,000
and the seller will pay your closing costs and pre-paids with
the difference! It may sound strange, but this happens VERY frequently.
To qualify you need:
2 years of steady employment in the same field of work.
clean credit report for 1 year, but you can have credit problems from the past.
original Certificate of Eligibility.
copy of DD–214.
How can I qualify for a 3% down payment mortgage?
FHA Loans
As stated, an FHA loan is officially considered a 3% down mortgage. If you have saved enough to cover your 3% down payment and your closing costs and pre-paids, then you are way ahead of the game. Otherwise, keep in mind that your down payment, closing costs, and pre-paid costs can come from a gift, another secured loan, a retirement fund, an investment or 401K, or any number of approved sources.
To qualify you need:
2 years of steady employment in the same field of work.
clean credit report for 1 year, but you can have credit
problems from the past.clean credit report for 2 years following a Chapter 7 Bankruptcy.
clean credit report, but can even by in the process of a
Chapter 13 Bankruptcy.Conventional Loans
Conventional loans are geared toward people with good credit and some savings to cover down payment. There is a highly specific type of loan for first-time homebuyers called the Community Home Buyers program. This loan does require a 3% down payment of your own funds (not from a gift or a loan). As in a VA loan, the sales price can be adjusted so that the seller can (and often does!) pay your closing costs. You will, however, be required to cover your pre-paid costs with your own money.
Since this program is intended for first-time homebuyers, there is a maximum income limit.
To qualify you need:
2 years of steady employment in the same field of work.
clean credit report for 1 year, with few credit problems from the past.
3% down payment of your own funds.
approximately 1 to 1½% to cover pre-paid costs.
How do I figure the value of the home for which I can qualify?
Rely on your Home Loan Specialist to help you measure your financial capacity when considering a loan. A rule of thumb would be to divide your gross monthly income by your total outstanding debts (including the new payment on the home you wish to buy). Generally, you are allowed 40% of your monthly income to be used for you housing expense and all other current obligations which are outstanding (credit cards, auto loans, student loans, etc.).
The best thing would be to get pre-approval for a loan—even before you begin looking for a home! Yes, you can get approval for a home loan—even before you find a home. Schedule a free, no-obligation loan evaluation session. With your “Approval Certificate” for a specific loan amount, you can shop with confidence for your dream home.
