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No Money Down Mortgage

By Edited Aug 5, 2015 0 1

No money down mortgages were very common throughout the mortgage boom's peak period. Mortgage lenders viewed the requirement of a down payment as an obstacle that stood in the way of reaching their numbers and monthly goals. The belief was that mortgage companies were juicing the market for houses and financing. Ultimately, the result of doing away with down payments was the later discovery that these borrowers simply did not make enough money to afford the homes they purchased. They defaulted on mortgage payments, putting the mortgage industry and economy in a downward spiral, causing changes to lending laws and Congress forbidding certain versions of no money down lending.

However, according to Business Week, the Federal government has recently decided to bring back a version of no money down mortgage loans. Granted, it's a much different approach to 0% down, but it can undoubtedly help homeowners move into a brand new home in difficult economic times.

Here is how it works. If it's been 3 years or more since a prospective buyer has owned a home, they qualify for a tax credit of $8,000 due to a stipulation in the new stimulus package. It was recently announced in May of 2009, with little fan fare, that the FHA (Federal Housing Administration) would cover closing costs and even offset the minimum down payment amount of 3.5% that is required for FHA loans. This covers most, if not all, of the fees and down payment amounts for the median price of a home in the United States, which is about $169K right now.

Closing costs have long been the item that deters most people from getting their feet wet in the housing market. It is the hope of officials that the monetizing of this tax credit will revive the slumping housing market and spur sales.

In addition to the tax credit, some mortgage lenders have maintained "103 Percent" programs where home buyers that have a good credit standing can purchase a home and have the closing costs bundled into the mortgage, thus getting themselves a no money down home mortgage.

There may also be help available to you through programs offered by non-profit organizations in your area.

Regardless of how you go about mortgages no money down, here is a basic breakdown of what you'll need:

1. You need to clearly demonstrate that you'll be able to afford the home you're buying. This has to be proven through documentation and financial statements like W-2 forms, pay stubs, checking or savings account documentation, etc. Gather these statements and bring them with you so your mortgage counselor can evaluate your financial situation and advise you on how to proceed.

2. Pick up the telephone and call various mortgage lenders to inquire about their no money down mortgage programs. The recent economic recession has caused a lot of companies to stay away from no money down lending but you may still find a lender willing to work with you or direct you to some kind of program to assist you. Every mortgage company or bank has a different approach to 0% down mortgages. Maybe you can ask specifically about 103 Percent mortgages that allow you to roll over closing costs into your mortgage.

3. While today's world relies on the Internet and telephone to communicate deals, it never hurts to meet face to face with mortgage lenders and let them review your financial statements. It may be a matter of showing a lender that you are likable, pleasant and polite, while selling them on the fact that you can financially live up to a loan commitment. They may be more inclined to take a chance on you or look into ways to defer closing costs and get you mortgage with no money down.

4. Always review your credit report before initiating contact with lenders. If you can afford such a service, look into companies that can help you clear up your credit report. Negative marks on your credit may hang around for sometime and it may take a professional to clean items up. This is especially necessary if you notice any fraudulent accounts and charges or any debt that doesn't belong to you. There may sometimes be items on your credit report that belong to another person sharing your name or a family member or former roommate. Your credit score is important and reviewing your credit report from all three reporting bureaus is definitely recommended if you're house shopping.

5. Pay off whatever debt you can before contacting mortgage companies or brokers. It can sometimes be beneficial to speak with your creditors directly and voluntarily close accounts or request a lower interest rate and payment plan to help you clear your debt faster.

Truth be told, it may be very difficult to get into a home these days with little or no money down. But there are definitely options to be explored. You can start with a little online research to familiarize yourself with different companies, different programs and industry terms and lingo. With luck, you'll find a no money down mortgage option that puts you in the home you've always wanted.

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Comments

Dec 3, 2011 12:10am
JadeDragon
So easy credit created the financial/housing mess and now the government hopes to use easy credit to solve the housing mess? Lovely.
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