You want to buy a house and each month you can easily make your rental payment but saving for that down payment is just too difficult. You’ve heard claims that buying is sometimes cheaper than renting and for the same price as rent you can potentially own a home. So how can you get there?
Let me start at the beginning so you know a little bit about zero down home loans. Did you know they were the cause of the 2007 housing bubble crisis and recession? Too many people signed up for loans they just couldn’t afford and mortgage lenders were loaning money all over the place to people that barely qualified. They threw money around like nobody’s business, promising easy financing and setting people up in adjustable rate mortgages they ballooned in a couple of years. Well, when big payments came due, many people couldn’t pay them (shocker) and lots of people lost their home.
You don’t want to be that person.
This is why you need a plan.
Right now, there are early signs of another burst due to the fact that history may be repeating itself. Certain signs are coming around again such as news articles promoting the best cities to flip real estate in, high home prices in many US cities and now, we’re back to “quick and easy mortgages”. All of these things can lead to a serious problem if not addressed before it’s too late.
But back to zero down mortgages… now that I’ve mentioned the potential hazards of a zero down mortgage, remember this, if it’s too good to be true, it probably is. There is a catch somewhere.
So does this mean you can’t afford a home?
There are several good options for no or low down payments but it should require some effort on the borrowers part. You certainly don’t want to lose your home in a year so getting set up right at the beginning of the process is just smart. You don’t want to be 3 years down the line with a mortgage rate that’s about to go through the roof and you can no longer keep your home; that’s not the end result we want, and neither do the banks.
So what are your options?
#1. VA Loan – Are you a veteran? Currently serving or have served? How about your spouse? You can get great loans through the VA system that don’t require down payments or mortgage insurance and many fees can be built into the loan.
#2. Down Payment Assistance – Having trouble coming up with that large down payment? You may qualify for a grant or state assistance to help with that. Each county, city and state are unique so ask your lender or loan officer about what’s available and if you qualify.
#3. USDA Loans – These loans are zero down through the United States Department of Agriculture but there are restrictions such as income eligibility and the home must be located within an area designated for these types of loans. You might be surprised though and what qualifies so be sure to check into this as well.
#4. FHA – The Federal Housing Administration has low down payment loans for as little as 3.5%. On a $150,000 house this is only $5,250, which still might seem like a lot but maybe more doable than a 20% down on a conventional loan. However, you will have to pay private mortgage insurance (PMI) until the home reaches an 80/20% loan to value ratio, at which time you can request it be removed. This is usually about $35-100 extra per month based on the loan amount.
There are options but most need specific qualifications. The KEY is finding a lender you trust and is willing to work with you to help you achieve your goals. There are also great self-employed bank statement loans.
BUT – Maybe is just not the right time either?! Maybe it would be better to pay off debt, save a bit and get your credit rating a little higher so when you are ready, you can feel more secure and comfortable buying.
If you would like more info on zero down home loans in New Jersey and the surrounding area that can offer tips, suggestions and a plan for a low or zero down home loan, contact us today!