Can you afford a mortgage payment but are low on cash? Would you like to buy a house now before prices and rates go up even more?
Here are four ways to get into your own home with little or no money down.
1) USDA zero down loan. The property cannot be in a highly populated city, but it doesn’t have to be way out in the country either. To check out property eligibility, see here.
2) Use a state bond for the down payment. All states have various programs that either provide the down payment or lend you the down payment with zero interest and no payment, to be paid back at the end of the loan. To check out options for your state, contact your local mortgage broker or full service mortgage lender (not big bank).
3) Use gift money for the down payment. A conventional loan has 3% down, FHA loan 3.5% down. Both allow gift money from family for the down payment.
4) VA loan is zero down for U.S. Veterans. This is a nice thank you for serving our country. Most lenders offer the VA loan.
Getting Closing Costs Paid For, Too
All loans have closing costs, which include the lender fees, cost of appraisal, title insurance, and attorney/settlement/escrow fee. In addition, there are property taxes and home owner’s insurance that must be paid for upfront. If you close in the middle of the month, there is a partial mortgage payment called prepaid interest.
The closing costs can be paid for by the seller if you have that written into your Purchase Agreement. (Ask your Realtor to negotiate this for you.) You can also receive a Lender credit toward closing costs. To receive a Lender credit, you take a higher interest rate. (There is no free money in mortgage.)
If you’re tired of paying rent, I encourage you to apply for a mortgage now, because interest rates are and will continue to rise, which means your monthly payment goes up. Don’t assume you cannot qualify for a home loan. Many people who feared that might be the case are now happily opening the door to their own home!
Please help pass on this encouraging news to others via social media. Thank you!
FHA – Federal Housing Administration
(Often referred to as a first-time home buyer’s loan; although, you needn’t be a first time buyer to get it.)
580 to 620 (depending on the lender and other credit factors)
(Program designed for first-time buyers with average or below incomes.)
Conventional 3% down
VA – Veterans Administration
500 to 620 (depending on the lender and other credit factors)
USDA – U.S. Dept. of Agriculture
640 (most lenders)
No score required with sufficient down payment (Usually 30% to 40% down payment required. Interest rates from 8% to 12%.)
IMPORTANT TO KNOW
- Lenders use your mortgage credit score, not the consumer credit score you get from a free site.
- Lenders use the middle score of three. Scores are not averaged together.
- When there are two or more people on the loan, the score of the person with the lowest score is used.
- Credit score is only one factor in credit qualification. Other factors are public records (such as foreclosure, bankruptcy, judgements, liens), last 12 months’ pay history, etc.
BUY NOW OR WAIT FOR A HIGHER CREDIT SCORE?
Is it better to buy a home with a low score and higher interest rate, or does it make sense to wait until your credit has improved?
That depends, but in general, if you can raise your score in three
months, it is better to wait and take the lower interest rate. On the other hand, if it is going to take a year or longer to raise your score and if house pricing are rising in your neighborhood, then I would buy the house now and refinance in a year or two. That way, you can build wealth in equity while your credit is improving. Most people cannot save money as fast as prices are going up. That said, it is an individual situation that you should discuss with your loan officer.
Q: Where can I get a VA loan?
A: You can apply for a VA loan from any mortgage lender (bank, broker, or direct lender) that participates in the VA loan program. Simply call the bank you do business with and a mortgage broker. Ask up front if they do VA loans. You still want to compare 2-3 offers, even with the VA loan.
Q: How can I get my Certificate of Eligibility?
A: No worries, your lender can get it for you. Or, you can complete a VA Form 26-1880 if you want to do it yourself.
Q: If I already had one VA loan, can I get another one?
A: Yes, your eligibility is reusable depending on circumstances. Normally, if you sold the home and paid off the VA loan, you can obtain another VA loan. Also, on a one-time only basis, you can take out a second VA loan if you still own the home, providing the VA loan is paid in full.
Q: I am the surviving spouse of a deceased veteran. Am I eligible for a VA loan?
A: The unmarried surviving spounds of a veteran who died on active duty or as the result of a service-connected disability is eligible for a VA loan. For more information, contact the VA Eligibility Center.
Q: Are children of a living or deceased veteran eligible for a VA loan?
A: No, the VA loan benefit does not extend to children of the veteran.
From the bottom of my heart, I express my appreciation, gratitude, and respect for all of our U.S. veterans and military. God bless you and your families.