100 Financing Or No Down Payment Bad Credit Mortgage Loans
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
100% Financing and No Down Payment: Bad Credit Mortgage Loans
Introduction
If you're aiming to buy a house without a down payment, sub-prime lenders now offer packages that make homeownership attainable even with bad credit. While interest rates are generally higher, these loans eliminate the need for private mortgage insurance, simplifying the process. There are two main types of zero-down mortgage options, each with distinct requirements.
Zero-Down Loan Options
1. 100% Financing: This option provides complete financing for your property. While it’s straightforward, not all lenders offer it.
2. 80/20 Loans: This involves two separate loans. Sometimes, your lender handles both, but in other cases, the seller or a second lender might cover the 20% mortgage. This option is more common but may involve some negotiation.
Qualifying for Zero-Down Loans
Eligibility varies by lender. Typically, sub-prime lenders require that any bankruptcies or foreclosures be at least a year old, whereas conventional loans often require these to be cleared two to four years prior.
- A credit score of 600+ is ideal; however, substantial cash reserves can also help you qualify. A reserve of six to twelve months in savings or other liquid assets is recommended.
- If opting for 80/20 financing with seller involvement, a credit score of 560 might suffice with sub-prime lenders.
Finding Zero-Down Sub-prime Loans
Both conventional and specialized sub-prime lenders offer zero-down mortgages. To secure the lowest rates and best terms, obtain quotes from multiple lenders.
Decide on the type of mortgage that suits your needs:
- Adjustable-Rate Mortgage (ARM): Easier to qualify for and offers lower initial rates, making it a good choice if you plan to refinance once your credit improves.
- Fixed-Rate Mortgage: Offers stability with a constant interest rate throughout the loan's term.
An ARM might be advantageous if you intend to refinance in the early years. Once your credit improves, you can transition to a conventional mortgage with better rates.
By leveraging these options, buyers with less-than-perfect credit can find a pathway to homeownership without upfront costs.
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