One of the largest single reasons that people share with me that they are unable to purchase a home is the recent increase in down payment requirements. Historically, down payment requirements of 15 to 20 percent were the norm. In recent years, however, consumers have become accustomed to very small down payments and in many cases zero down options.
It certainly is true that larger down payments are being required these days, but many people are surprised to learn that there are still quite a few low down payment options and even some zero down programs still available. With housing prices hitting lows we have not seen in years, now may be perfect timing to jump into the market.
Veterans Zero Down Mortgage Loans
You May Be Eligible If Any One of the Following are True:
• Served 181 days during peacetime (Active Duty)
• Served 90 days during war time (Active Duty)
• Served 6 years in the Reserves or National Guard
• You are the spouse of a service member who was killed in the line of duty.
USDA Zero Down Mortgages
A United States Department Of Agriculture loan guarantee can set you up for a zero down mortgage with fantastic fixed 30 year rates. The program requires a nominal 620 credit score. It is uniquely flexible allowing the underwriter to work outside of normal historical credit problems of a borrower. This makes getting approved for a USDA loan much easier than a conventional loan.
One of the requirements for a USDA loan is that the proposed purchase must be of a house in a 'rural' area. So, how far out in the country do you have to be? 50 to 70 miles outside of Chicago would do it. About 20 miles outside of Dallas would do it. The beach community where I live north of Daytona Beach appears to be completely eligible. I find this odd since by no means would I consider my surroundings rural. As with any government program, the method to their madness may have no reasonable explanation. Access the USDA Mortgage Site to see what areas near you are eligible. I will put my urban survival writer's hat on for a moment and point out that living in the rural outskirts of a major city has its advantages.
Federal Housing Administration loans require down payments of as low as 3.5%. The amount that you can borrow will vary based on where you live. You will be required to carry FHA mortgage insurance and meet strict debt ratio requirements. You an actually get approved two years after bankruptcy and only three years after a foreclosure. Perfect credit is not a requirement.
Most people don't realize that they don't necessarily have to go to a bank to get a mortgage loan. With rates below 1 percent on CD's, money is flowing into private mortgages. The process is really quite simple. Lenders and borrowers many times find each other through classified ads or are introduced by Realtors or title companies. If there is a meeting of the minds on the terms for a loan, a title company and/or lawyer will put the documents together. There is a closing, just as if you were to obtain the loan through a bank. Getting a zero down private mortgage may be tough, but if you are buying a property at a significant discount a private lender may accept it as security enough. Most private loans will be amortized on a 30 year schedule but will likely require that you refinance within five to ten years.
Christians Network Within Their Church To Find Private Mortgage Money
I have read articles recently about Christians opting for the private loan option and networking within their local church. Private mortgages can also be made from IRA accounts which really opens up quite a lot of possibilities. There are several IRA Trustees that provide investing in a mortgage as an option within a self directed account. One rule to be aware of, you can not make a mortgage loan from your IRA to direct relatives. IRA trustees will have all of the IRS rules and restrictions in mind when assisting you in an IRA funded mortgage transaction.
Please use the comments section below to share your experience (good or bad) with any of the programs discussed in this article.
Helping you make the most of God’s money!