Several home finance choices are offered to first time home buyers. Real estate experts have predicted an upcoming market cool down, wherein many people will be able to purchase their first real estate property. The home buying process has many phases. Aside from choosing the perfect home and picking an agent, buyers must get approved for a mortgage loan.
There are several different loan programs available. Traditional home loans have 80% loan-to-value. In other words, the broker or lender will approve the borrower for 80 percent of the purchase price. If the property's sale price is $100,000, the lender will finance $80,000, and the borrower is required to provide a down payment of $20,000.
Before rapid property appreciations, a 20% down payment was somewhat reasonable and attainable. Quite the opposite exists today. Some mortgage lenders carry on the old tradition and require down payments from every applicant. On the other hand, a large number of brokers and lenders altered the lending criteria, and started offering 100% financing. Loan programs such as the Fannie Flex 100 requires zero down, and borrowers only need to contribute $500 of their own funds at closing.
Which Applicants Qualify for 100% Financing?
Even though sizeable down payments are no longer a requirement, lenders approve “no money down" mortgages with forethought. Many lenders assert that borrowers without cash for a down payment are risky applicants because their powerlessness to generate a cash reserve demonstrates poor money management. For this reason, “no money down" loans applicants are scrutinized.
To meet the requirements for a zero down home loan, borrowers must have satisfactory credit. A few lenders adhere to firm guidelines and will not approve a loan request if the applicant’ credit report exposes any late or missed payments within the past twelve months.
Disadvantages of “No Money Down" Loans
Upfront investments with “no money down" loans are little or none. This may give the impression of a terrific deal – but there's a catch. Mortgage lenders accept a gamble with each “zero down" home loan. As a result, borrowers are charged additional fees. Fees such as private mortgage insurance and a higher rate will increase the mortgage. To lower the rate, borrowers should deposit a small down payment. It doesn’t have to be the entire 20%. Mortgage lenders accept monies borrowed from family, friends, life insurance policies, and retirement funds.
Recommended Lenders for 100% Financing Mortgage Loans - We maintain a list of recommended mortgage companies online and update the list regularly.
Mortgage Companies For Borrowers With Poor Credit- See our list of poor credit mortgage lenders online.