Buying homes no money
For most American real estate consumer, the down payment to be made has always been a matter of grave concern. They have always been on the look out for no money down home loan mortgages, which a few years back was somewhat tough. But today you can afford to forget what your credit rating is, whether it runs in your favor or against you, you still stand a good chance to avail of these wonderful no money down loans.
The lending markets have gone softer and lenient in their terms related to home loans, allowing not just 100 percent but even 103 percent finance to purchase homes. And the versatility these loans offer is incredible. There are plenty of such options to get zero down payment home loans, for the real estate consumers to choose from.
For those who are buying an existing house, there is even the possibility of saving on the closing cost by negotiating with the seller to bear the closing costs. If you have hired a realtor then leave this task for him to do, but you must inform him of your intention about getting the closing cost from the seller. They smartly love to call this as the sellers contribution in the documents pertaining to the loan. Some lenders impose limits on the contributions made by the seller for the closing costs in the form of some types of fees. The mention of this along with details is a must in the purchase contract, which is prepared by the loan officer and the real estate agent.
Even though you are taking a 100 percent loan finance to buy your new home, it is still advised that you keep some reasonable amount of money in either completely liquid form or in some form which can be quickly liquidated. This will help to build a reputation and trust with the lender, as he knows that you have some money with you to make the mortgage payments for the first few months. These funds will serve as reserves, to meet up with any initial problems. Though this is not essential as you are buying your home on no money down basis, still it is recommended.
In spite of the fact that these loans are called no money down, still you will need to spend some funds on things like the home owners insurance and there may also be requirements for some earnest money. The buyer may have to make up for these extra expenditures in the beginning though they are refunded back when the deal is through.
The options and the programs available for buying homes with no money down are in abundance. There is a wonderful scheme for those who have either served or are still serving in the army; this is known as VA loan. And the veterans can go ahead to purchase a house with absolutely no money down, except that they may have to provide for a funding fee. This funding fee is included in the loan amount itself, as per the normally carried out practice. It is calculated as a certain percentage of the total loan amount, and there are different percentage slabs to match the status of the veteran, like those using the facility for the first time may be under a lower slab. If the veteran is suffering from a disability, which has resulted from his duty, then he may be totally exempt from having to pay this funding fee.
Many a times the seller may offer no concession and you would need to pay the closing cost from your pocket. In such a condition a 103 percent loan is worth considering.
The additional three percent provided in the loan, which is over and above the cost of the house, is to provide for the closing costs. But to avail this type of loan you need to have a good credit rating and a stable source of income. With regards to these loans, the lenders do a much scrutinized appraisal of the property, to evaluate its real worth of it. The lender could also have a policy of cash reversal, which can be an amount equal to payments of two to six months.
Whenever opting for no money down mortgage loans, be prepared to pay higher rates of interest in comparison to the loans with some down payment made by the buyer. One of the ways to get 100% finance is to divide the entire cost of the house into two parts, one being 20% and the other being 80%. Then the buyer takes two separate mortgages for these two parts. This option is popularly know as 80/20, and is preferred by people to avoid mortgage insurance which would apply otherwise. This is a nice way to avid PMI knowing well that the PMI gets you no tax deductions. Though 80/20 is the normal split up practice still you may want to consider other split ups like 70/30 or 75/25, as few lenders have better offers available on these split ups.
The 100% finance or no money down option is not just limited to the buyers who want to use the house for their personal purpose, but is also extended to those who want to make investments in the real estate business. It is a good way to enter real estate business when you may have no money to begin with the same. The last bit of information I would like the readers of this article to know is that in the last year there were 42% first time home buyers who made use of this no money down or 100% finance option to move into their new homes.
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