Getting A No Down Payment Mortgage Could Save You A Lot Of Money
For home buyers that cannot afford the full price of a new home, a no down payment mortgage may be the solution. As the economy remains sluggish and home prices continue to fall, lenders are offering mortgages with as little as a twenty percent down payment. This offers first time home buyers the opportunity to buy their dream home without the worry of being saddled with monthly payments they can’t afford. In some cases, a loan company will finance a portion of the purchase price so there is no need to pay anything down at all. This can be a great option for borrowers that have good credit and a steady income.
Lenders have found that people looking to buy a house but do not qualify for traditional loans often fall into two categories. The first group is made up of homeowners needing larger sums of money, such as to put down a larger amount on a new home. These people often do not have good credit and can’t get traditional mortgages. In addition, these buyers may have a poor financial history, such as missed mortgage payments or a bankruptcy.
In these cases, lenders have developed loan programs that offer mortgages that require no money down. These types of loans are referred to as “sub-prime” and they can only be offered in high-cost areas. An example of a sub-prime loan is a thirty year fixed rate mortgage. A traditional, conventional mortgage typically requires a thirty year fixed rate loan, which has a lower interest rate than loans with adjustable interest rates.
Another group of home buyers is made up of young couples on the rise. These couples are usually students, and many do not have steady employment. These home buyers can apply for a loan that does not require a down payment. The loan is for the cost of the home, with no money down. These no down payment mortgage options are sometimes referred to as “start-up” loans and are not often recommended by lenders.
There are those who would prefer to obtain a conventional home loan with a fixed, lower interest rate. For this group of home buyers, obtaining a no down payment mortgage is an attractive option. However, this loan option is not very common. Lenders do not make many conventional loans with no money down.
Those who wish to obtain a no down payment, low interest mortgage can try shopping for competitive loan requirements from different lenders. In general, the lender with the lowest interest rates will be a good choice. If you go this route, be sure to shop around because there are differences in the loan requirements of the various lenders. Some lenders require lower credit scores for borrowers who make a down payment. Other lenders require lower income, which can be a hassle for some borrowers.
The interest rates offered for traditional loans are typically between two and five percent. These rates are not likely to be much lower than the no down payment mortgage rates being offered by some lenders. If you shop around for interest rate quotes, you can save a lot of money on your monthly payments.
Another alternative is to get pre-qualified for a no down payment VA loan. If you own property that has equity built up, you may qualify for interest rates as low as five percent. Because these loans are backed by federal funding, they have much lower interest rates than traditional mortgages. Even if your credit scores are low, you may be eligible for interest rates below the no down payment mortgage rates being offered by some lenders. You can learn more about your homeownership options, including common mistakes to avoid, with a free mortgage tutorial.