Three Easy Steps to Finance 100% of Your Purchase With Zero Down Payment and No documentation Required
Home financing is a complicated process, but there are several steps you can take to ensure that you find the best loan for your situation. The most important thing to remember is that mortgages come in all shapes and sizes. Your goal is to shop around until you find the best deal. Here are some tips to help you get started.
Most conventional loans will not cover closing costs. For loans, this means that the down payment will not be covered or that there will not be a down payment. The lender will have to cover these costs. The exception is for borrowers who have unused funds from a previous home purchase.
Another home financing option is the FHA home loan. These loans are guaranteed by the Federal Housing Administration, making them less risky than conventional mortgages. The Federal Housing Administration also insures home loans that are originated through government agencies and departments. The agency maintains a database of all home loans. This database contains information on different types of loans including FHA, VA, conventional and FHA. The agency also offers counseling services and a home loan calculator.
A fixed-rate mortgage comes with a set interest rate. With a fixed-rate mortgage, the monthly payments remain the same for the entire life of the loan. However, variable-rate mortgages come with lower interest rates and may fluctuate in value.
If you are a veteran or a member of the U.S. military, you may qualify for a federal home loan program called the FHA (Federal Housing Administration). These loans are insured by the U.S. Department of Veterans Affairs. If you have a cosigner who is a veteran or a member of the military, you may get a discount. To qualify for this type of loan, you will need to supply the cosigner’s Social Security number, birth date, address and other important information. You can find more details about zero down loans and about affordable monthly mortgage insurance rates at the Federal Housing Administration website.
Another option is to use your home equity line of credit. Your home equity line of credit is similar to a conventional loan, except that it does not require a down payment or a closing payment. With a new loan, you use your credit card as collateral. Home equity lines of credit come with variable interest rates and different repayment options. To learn more about using your credit cards to finance your home, see the “using your credit cards to finance your new home” article in the National Foundation for Credit Counseling Services’ newsletter, “Credit Counselling: Tips and Resources,” (forthcoming issue).
Traditional mortgages come from a variety of lenders. Home buyers can choose from government-sponsored (FHA, VA) or commercial lender programs. To learn more about choosing a payment option from a different lender than from the national mortgage company (i.e., FHA) that financing your current home purchase, see “mortgages and mortgages: The Best Option for Getting a Good Quote.” (forthcoming issue).
If you are having difficulty making your monthly payments, see “What to Do If You Can’t Afford a New Mortgage.” The Federal Housing Administration offers a comprehensive website where buyers can get pre-approved for federal housing grants. These grants are only available on the FHA, VA, or conventional loans. To find out more about getting money from the federal grant program for first time home buyers, visit the FHA website.
As a second step to help finance 100 percent of your home, consider refinancing your current mortgage loan. This second option is sometimes the best way to go. Homeowners seeking to refinance their loans should be aware of common pitfalls such as higher interest rates. Many home loan refinancing companies offer no-fee, no-cost or low-cost refinancing options. For those who have good credit, they may be able to find a lender willing to offer a reasonable interest rate and terms that meet their financial needs.
Homeowners who refinance can save money by reducing the amount of cash they need to borrow each month and by eliminating the closing costs associated with a conventional loan. Some buyers are able to reduce their mortgage loan by refinancing for zero down payment and no documentation costs. Any purchase price not applied towards the closing costs will be taxed as income. To determine if you qualify for this type of financing, contact the FHA or HUD to find out more information on qualifying for government programs.
Home buyers and homeowners should also consider the lender’s ability to collect. An experienced lender will have established procedures and documentation that minimize the likelihood of non-payment. A lender that values its loan assets is unlikely to be distressed if the borrower defaults. In contrast, some lenders take advantage of borrowers’ current situation by insisting on high payments that exceed their credit worthiness. A savvy buyer can reduce the risk of lending to an unscrupulous lender by conducting a thorough research on the lender’s history and practices.