Current Zero and Low Money Down Mortgage Financing Solutions [mortgage-interestrates.blogspot.com]

Current Zero and Low Money Down Mortgage Financing Solutions [mortgage-interestrates.blogspot.com]

Question by QNA: Is there any good reason to justify getting a zero down mortgage? Aside from the obvious (the lack of funds), is there any reason at all to get a zero down mortgage? If you don't have the money for a downpayment at the present time, but can be approved for a mortgage, would it be better to save up for the downpayment or just go ahead and sign the mortgage??? This probably requires a fairly complicated answer, so thanks in advance! Best answer for Is there any good reason to justify getting a zero down mortgage?:

Answer by Watchman
With a 20% down payment they can't force you to pay mortgage insurance.

Answer by Maggy G
Yes, it's true that a 20% down payment keeps you from paying PMI (private mortgage insurance), but there are ways around that. Some lenders give you an 80% 30-year mortgage, and then a 20% home equity loan that counts as your down payment, so although you don't technically bring a down payment, you still don't pay PMI (see below for details) Just be aware that when taking a 100% mortgage, you're essentially betting that your house value will only go up. If it goes down and you're forced to sell, you'll potentially face a huge loss

Answer by mortgageguy
Yes! Rates now are very low and mortgage insurance on 100% financing is only .60% extra for good credit! The average home appreciates quite a bit in a few years. The key is to buy smart. I don't care how good your interest rate is... The property you buy and how much you pay is the most important factor on appreciation. Pick the least expensive home in a desirable neighborhood. Location is everything. The market is stabilizing now and a great time for buyers because rates are so low and prices are more reasonable.

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It was not that many years ago that home buyers with just about any credit score could purchase a home with little to no money out of pocket. When those relaxed lending guidelines were coupled with depreciating real estate values, the result was hundreds of thousands of homeowners upside down in their mortgages and unable to refinance. To complicate the situation even more, a good percentage of these borrowers took out adjustable rate mortgages, many with 2 to 3 year introductory rates. And unlike many Freddie Mac and Fannie Mae agency products, there was likely no chance of these sub-prime mortgages' rates  remaining flat or even adjusting to a lower rate.  Lending guidelines also tightened significantly for most products making borrowers who previously would have qualified for refinancing stuck in their current program.

FHA Loans

Today there are a few low and zero down mortgage products in the marketplace including FHA loans, VA loans, and USDA rural housing mortgages.

FHA loans, run by the Federal Housing Administration, are insured against default by the FHA. Approved lenders are guaranteed that they won't have to write off a mortgage if the borrower defaults on his or her loan. FHA does keep track of the default rates of the various FHA approved lenders and companies can lose their right to participate if they show a poor track record. Down payment requirements change periodically and currently many FHA products require a 3.5% down payment (subject to change).  FHA loans are popular many reasons. First, unlike USDA loans, there are no income caps. Meaning you can make $ 200,000 and still obtain an FHA mortgage as long as all other qualifying criteria are met. FHA loans are also thought of as having slightly less strict underwriting guidelines. One downside to FHA loans is that loan limits may be lower than what would be available under Fannie Mae's and Freddie Mac's conforming loan limits. FHA loans also have an upfront private mortgage insurance (PMI) premium and recurring PMI payments are added to monthly payments for a set number of years even if one's loan-to-value ratio drops below the 20% threshold where many lenders eliminate PMI.

VA Loans

VA loans are a zero down mortgage solution which are designed to help qualifying active duty servicemen and women, veterans, and surviving spouses purchase property with little to no money out of pocket. These are made available by approved lenders and are guaranteed by the United States Department of Veterans Affairs.  Other benefits of VA loans may include no private mortgage insurance, less restrictive debt-to-income ratios, and more relaxed credit guidelines than would be found with agency conforming loan products. Eligibility requirements can be found on the U.S. Department of Veterans Affairs website (www.benefits.va.gov/homeloans).

USDA Rural Housing Loans

USDA Mortgages, administered by the United States Department of Agriculture Rural Development, are designed for lower income individuals who are looking to purchase homes in rural area of the United States. Eligibility is affected by both a borrower's income and the property itself. According the USDA's web site, applicants  can only earn up to 115% of the median income for their area.  Loan programs are for 30 years and there is no down payment required. Borrowers can search for a property by its address on the USDA site to see if the home is in a USDA eligible area.

While the aforementioned mortgage programs comprise the majority of low and no money down mortgage products being originated in today's marketplace, there may be some banks, credit unions, or other lending institutions who are offering their own low down payment financing options. Most consumers should consider a fixed rate product when taking out a low money down mortgage as real estate prices are still heading lower in some areas of the country making the risk of being upside down in an adjustable rate mortgage a scary prospect. Be sure to seek the advice of a licensed mortgage professional before moving forward with any home loan decision.

 

 

 

 

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