No Down Payment Mortgage Loans for People with Bad Credit
Getting approved for a mortgage with bad credit is a feat worth noting, but securing a home loan with bad credit and no money down is a feat worth celebrating. At one time qualifying for a 100% loan was not so difficult. In 2005 a borrower with a 580 fico could actually get approved for a house loan with no down payment and bad credit and limited documentation. Today as the housing and foreclosure crisis continues, finding a lender that offers zero down home financing and mortgages for people with bad credit is increasingly difficult.
Buy a Home with $0 Down and Bad Credit if You Meet the VA Lending Criteria
In 2013, a borrower with a 580 credit score seeking 100% financing and less than perfect credit would need to have VA loan eligibility and compensating factors like a strong letter of explanation for delinquencies being listed on the credit report.
The USDA home loan does not require any down-payment, but not many borrowers meet the requirements for rural home financing and the credit score requirements are typically more demanding than military home loan programs.
FHA Home Financing with Bad Credit
FHA home loans continue to be aggressive with credit, but these government mortgages require at least a 3.5% down-payment. In some cases, FHA lenders will request a 5 to 10% down-payment when there are significant credit issues like bankruptcies or foreclosures being reported. Find FHA Home Loans for Bad Credit.
No Down Payment Mortgage Loans - Understanding 80/20 Loan Option
By Carrie Reeder
When applying for a mortgage loan, down payments are generally required as part of the financing. Many traditional mortgages will only finance 80 percent of the home price. Thus, homebuyers are obligated to provide the additional 20 percent. Having a down payment of 20 percent is ideal in a perfect world. In reality, few people have access to this type of money. For this reason, mortgage lenders are offering 80/20, or piggyback mortgage loans.
How Does an 80/20 Loan Work?
The concept around 80/20 home loans is very simple. Ordinarily, if a homebuyer did not have a down payment of 20 percent, they would have to purchase private mortgage insurance, (PMI), to complete the home financing. On average, PMI increases mortgage payments by $100.
If accepting an 80/20 mortgage, PMI is not required. Instead, home buyers receive 2 loans to finance the home purchase. A 1st mortgage is approved to finance 80 percent of the home cost, whereas a 2nd mortgage or home equity loan is approved to finance the remaining 20 percent.
Who Qualifies for Zero Down Lending, AKA 80-20 Home Loans?
Any homebuyer hoping to avoid private mortgage insurance may qualify for an 80/20 option. Piggyback loans are especially beneficial for first time homebuyers. Young couples will also benefit from these loans. Usually, these individuals have not been able to build a large cash reserve. This way, they do not have to put off buying a home.
80/20 home loans are also offered to individuals with poor credit. Lenders vary in their loan qualification guidelines. Traditional lenders such as banks, credit unions, and mortgage companies prefer applicants that have a high credit rating. Thus, they may not approve loan requests for credit scores that fall below 640.
On the other hand, many lenders offer a range of bad credit mortgage loans. These consist of mortgages that provide assistance for down payments, closing costs, low mortgage rates, etc.
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