Buying a house with no money down may seem like an impossible task. The thought of walking through a real estate agent’s office with a mortgage in your hand seems almost too good to be true. But, that is exactly what happens to many homeowners. They meet all the qualifications for the loan, submit their application, and are rejected for approval. While the process may seem frustrating, it can help you qualify for a better interest rate by using some tips from your real estate agent.
Most traditional loans require borrowers to be at least 18 years old, have a full-time job, and a minimum of a two-year degree. If you do not fit any of these requirements, a conventional loan is not a possibility. Those with bad credit or low-income are also excluded from qualifying for a traditional loan. The only option is a two-year FHA loan, which allows borrowers who do not meet credit requirements to qualify for assistance with buying a house with no money down. This type of loan can help you secure a house even if you don’t meet income guidelines or have bad credit. A single-family guaranteed homeownership loan, which is also called a rural mortgage, will make housing affordable even for those who are considered a higher risk.
Traditional lenders usually do not approve low-income borrowers, so first look at your credit score and compare it to the national average. If you have a good credit score, you will probably be approved for a conventional loan. You should look for traditional lenders offering low interest rates on a rural mortgage instead of lenders that specialize in commercial property. These lenders might offer lower interest rates because they are more likely to be approved by larger metropolitan areas. A house with no money down can be purchased with little money out of pocket, but you need to research your options.
HUD Home Affordable Program – The federal Office of Housing and Urban Development offers homebuyer incentives to qualified buyers with down payment assistance loans. Look at what the OHA has to offer. The program offers interest-free and debt-free loans for qualified buyers, which can reduce your mortgage payment and save you some money in closing costs. Look for a down payment assistance loan from HUD approved lenders. In addition, the program offers first-time homebuyers tax credits, which could further reduce your home buying costs.
Qualifying for VA Loans for Individuals with a Credit Score of at Or Less than 200% of the National Average – Qualifying for a VA loan does not require a credit score of at or below 200%. Instead, you must qualify under General Veterans Administration (VA) Service Requirements. Service requirements vary from one agency to the next. Typically, the VA requires that borrowers be non-smokers, need to have a high school diploma or its equivalent, and be eligible for at least 90% of the monthly basic fee (which includes mortgage and rental insurance premiums) for at least one year. To find out if you qualify under any of these service requirements, contact the nearest U.S. Veterans Administration (VA) office.
Income and Purchasing a House with No Money Down: You do not need to have a high enough FICO score to qualify for a VA loan to buy a home. However, your credit score will determine how much you can qualify for in mortgage interest and property tax deduction. If you have a low credit score, a lender may require that you have a higher down-payment, a higher loan-to-value percentage, or a larger initial purchase down payment. A larger down payment allows you to have a bigger piece of the house, so you will pay less interest over the life of the loan.
Monthly Payment and Deductible on Mortgage Loans: Most borrowers who purchase a house are required to make monthly payments toward the total loan amount. These monthly payments and deductibles can affect your overall debt ratio, which is the calculation lenders use to calculate your mortgage insurance rates. Higher debt-to-income ratio indicates a higher risk of foreclosure and default. Therefore, you must always be aware of the balance between your mortgage payments and your total income.
Housing Finance Options for People With Bad Credit or No Money Down: Many borrowers with bad credit or a low credit score seek mortgage refinancing because they cannot obtain traditional loans. For this reason, many mortgage lenders now offer their own mortgage refinancing program for borrowers who cannot qualify for traditional loans due to credit score or financial hardship. HUD offers a variety of mortgage refinancing programs to borrowers. Some of these programs are also designed specifically for borrowers with bad credit or FHA loans. It is best to contact your local housing finance counselor to determine if you are eligible for a specific type of FHA loan or mortgage refinancing program. This will ensure that you get the assistance you need from the right company.