I know it sounds too good to be true, but you really can buy a home with no money and bad credit. With the relaxed lender cash and credit requirements, it’s still possible. But don’t wait. They won’t be this forgiving for much longer.
So, it’s a fact…but for how much longer?
You may have owned a home before and are presently renting, or are a first time homebuyer and need a way to break into the housing market but held back because you thought you required a substantial down payment. Or you may be in the position where you do not want to liquidate your financial assets to use as a down payment on a home. Regardless of your present situation, you want a way to get into or to reenter the housing market without having to invest any cash. The Zero Cash Program may be just the answer you need.
Many uninformed consumers, real estate agents and even mortgage professionals all knee-jerk to thinking FHA an VA home loans as the only options for No Down Payments loans...boy is that old news! There are other restrictions in FHA and VA loans when compared against the new programs lead me not to recommend them for our purposes here.
Conventional loans typically viewed as "A" credit loans have undergone a major overhaul with the new automated approval systems (named Desktop Originator for Fannie Mae and Loan Prospector for Freddie Mac) that allow for Zero Down loan programs combined with credit issues. Fannie Mae has even recently added a new program to their system, the My Community Home loan which has even more advantages than their original Zero Down program call the 100% Fannie Mae Flex loan.
Fannie Mae’s programs also provide for bad credit. Most folks don’t know this. The computer system approves loans with credit issues and ranks them as Level 1, 2, and 3. Each level represents an increase in risk and therefore warrants an increased interest rate. But to offset this increased rate, the programs offer what they call a Timely Payment Reward at Level 2 and 3. This “reward” is a half percent and a whole percent rate decrease once you’ve had 24 month without a 30 day late on you record. That’s automatic reduction of rate and payment as soon as you string 24 months consecutively without a late payment…not a bad deal. The only drawback for Fannie Mae’s programs is they required a minimum buyer investment of $500. So, it’s not a true “Zero Cash, but for most it’s close enough.
Now let’s discuss the fastest growing sector of the mortgage industry: sub prime lending. By definition, these lenders and their loan programs are designed to give those with credit issues an opportunity to become home owners. These lenders and loan programs number in the thousands…too numerous to discuss each here. Suffice it to say, if you can prove your income- pay stubs, bank statements, etc – there is a 100% loan even down to a 500 credit score. In case you don’t know, that’s really low credit score! These lenders disregard collection accounts but require that judgments get paid off. Some lenders require you have at least 3 open credit accounts and offer low rates; others don’t and have higher rates. Some lenders even allow two related and living together borrowers to average their scores and get a better rate. Virtually all these programs allow the buyer to close without any cash investment at all…not even the $500 Fannie Mae requires. We have found the “true” Zero Cash home buyer program!
Sub prime lenders and the loans they offer are becoming pretty controversial these days. With home values stagnating and eventually dropping, these lenders and loans are quickly becoming the scapegoat for the increase in foreclosures across the country. This charge (well founded or not) will shortly have a negative effect on the continued availability of these programs. So, if you have bad credit and want to buy a home…now is the time. Buy now before it’s too late!
Note: The term 100% loan program as a term that's interchangeable with Zero Down...they mean the same thing...your loan is the same value as the sales price of the home. For example, you find a home for $200,000. A Zero down loan means no down payment so the loan is $200,000 which also equals 100% of the sales price. So that explains why the two terms are interchangeable...at least I hope so!
Before we get down to the nitty-gritty on how to buy with Zero Cash and Bad Credit, let's get a few definitions out of the way. First, Zero Down Payment is not the same as Zero Cash. Zero Down Payment means exactly that..no cash needed for down payment, but what about all the closings costs? Buying a house involves closing costs, prepaid interest, and usually establishing an escrow account for taxes and insurance...every time. There is no getting around it. All of those added together will need to be paid in cash at the closing and be thousands of dollars. You can estimate pretty accurately for homes with a sales price between $170,000 and $300,000 of between 3.0%. So for example, on a $200,000 priced home, 3% equals $6,000. Needing $6,000 cash to closing is hardly Zero Cash! So don't be hood-winked by advertising saying "Zero Down" home loans...you now know there's more to the story. But don't lose hope, there are ways to use a No Down payment loan and create a Zero Cash sale for those of you without cash or those who do, but don't want to use it!
How do we turn a Zero Down Payment Loan into a Zero Cash transaction? It’s really rather simple. You use a Zero Down Payment loan (Fannie Mae or sub prime) and then get the all the costs paid by the seller. It’s not rocket science, I know, and if the market wasn’t so slow, it would be pretty tough to get sellers to cover costs…but right now it works just fine. So, if you have bad credit and want to buy a home with Zero Cash do it now before it’s too late.
Rob K. Blake, author of the book Mortgage Secrets Exposed! and host of The Mortgage Insiders Show, has been teaching folks for the last 15 years all the tips and tactics to save $1,000s when shopping for a mortgage. For more home loan tips, Visit his website at www.themortgageinsider.net . |
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