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Topics
100% Financing or 0% Down Loans
First Time Home Buyers
Avoid Mortgage Insurance with 80/10/10 Financing
No Cost Purchases
Purchase Pre-Approvals
No Income Documentation Loans
More Home Purchase Topics
Yes, it's true! There is such a thing as 100% financing- with no
money down. The interest costs are higher in this type of loan, but
the interest the down payment money earns in the investment may
well make this a worthwhile situation. As a rule of thumb, fully
leveraging your real estate purchase would make the most sense if
your investment returns were better than 3% over the prevailing 30
year fixed rate. Click
here for 100% financing information. or Click on the link below
to APPLY NOW!
If you purchase your home with less than 20% down, chances are you
will obtain a loan that is insured by ``Mortgage Insurance'' (MI).
Private mortgage insurance or MI is a type of insurance provided by
a private mortgage insurance company to protect a lender in the
event of default on a loan. This type of insurance is generally
required when a borrower has less than 20% equity in a home; i.e.
the loan amount divided by the property value is 80.01% or greater.
As your home appreciates or your loan balance decreases (or a
combination of the two), and your equity in the home exceeds 20%,
you may petition the mortgage holder to drop the MI. This process
may be cumbersome or difficult.
One way to avoid paying MI is to purchase a home with a combination
first and second mortgage. The first mortgage would be limited to
80% of the home's appraised value. The second mortgage, which would
close in conjunction with the first, would then provide for the
difference between the home's purchase price, less the 80% first
mortgage, less the down payment available . In other words, if you
have a 10% down payment available, your first loan would provide
for the 80% mortgage with a second mortgage of 10%. This is
commonly referred to as an 80 -10 -10 transaction.
Another way to avoid incurring MI payments is to find a lender that
offers self-insured programs. This type of loan would have a higher
interest rate in place of the private mortgage insurance premium.
While mortgage insurance premium payments are not tax deductible,
the interest associated with a self-insured mortgage would be fully
tax deductible.
The decision of whether to obtain a loan with mortgage insurance
versus the above two options should take into account the combined
total monthly payments of the various options, adjusted for the tax
benefits of interest deductions.
In a purchase situation
a no closing cost option can work extremely well when the borrower
has limited funds available for closing or when the rate market is
declining and the borrower may want to refinance quickly. No
closing cost loans can be used effectively to free up more cash for
the down payment or save for repairs or other uses. If the seller
can not credit for closing costs (due to low equity or other
reasons), a no closing cost loan is the next best alternative.
In some cases no closing cost loans can give a borrower more cash
than is needed for the direct closing costs. As long as this does
not exceed the lender's guidelines (typically 3% of the purchase
price in overall credits), this cash can be applied to other costs
in the transaction. One important item to remember is that a no
closing cost loan will not have points, and thus no
deduction for that cost. Additionally, the other
costs are paid for and no deduction is available. If you are
purchasing a home, points and some costs are generally entirely
deductible in the year you buy. This is true even if the seller is
paying for your points.
A purchase preapproval is a lender's analysis of you as a borrower
without specific property information. In other words, your loan
information is submitted to a lender for full underwriting and
includes all borrower details, such as employment information,
asset information, and credit history. The lender then approves you
as a borrower, subject to a maximum loan amount, down payment, and
interest rate.
Getting pre-approved for a loan is critical in today's real estate
environment. Many Realtors do not want to accept offers from buyers
unless their home loan has already been approved by a lender.
By going through the loan process prior to being in contract on a
home, you can eliminate all of the obstacles to borrowing without
jeopardizing an actual purchase transaction. Once your loan is
approved, your real loan closing will be quick and subject only to
a satisfactory appraisal and title report on the home.
To begin the preapproval process you need to make some assumptions
for your purchase price, loan amount, and loan program. Any of
these assumptions can change once you've found your home, but it
helps to do the following:
1- Complete your application for the
maximum loan amount and purchase price that you're interested in.
You can always reduce these
later.
2- Get your loan approved at an
interest rate that is higher than what you expect to take. Again,
the loan program that you decide upon can differ from what you are
initially approved at.
The preapproval of your loan will ensure that your real
purchase will go smoothly once you have located the perfect home.
Often grouped together
despite their subtle differences, ``light documentation,''
``no-income verification'' and ``quick qualifier,'' or ``QQ'' loans
are a solution for many buyers who have income from sources that
are hard to verify. Usually these loans are used by self-employed
borrowers who have difficulty verifying all of their income, or by
borrowers with very complex income structures. For example, a
borrower who has income primarily from rental properties and
investments may be hesitant to verify all sources of income due to
the volumes of paperwork this would require. With a no income
documentation loan, the borrower can simply state his income on the
application, and the lender will use this stated income to qualify
the loan. Why do lenders do this? Because they recognize that by
charging a slightly higher rate of interest they can rely on this
stated income of the borrower and cover the additional risk.
Lenders do in fact rely on verifying that the borrower has assets
that logically match the stated income, along with excellent
credit.
Apply for a No Doc Loan
With a higher cash down payment, typically 25% or higher, along
with good credit, these loans allow borrowers to buy into purchase
prices a lender wouldn't ordinarily qualify them for. Because
no-income documentation loans carry a higher interest rate, they
should only be used when necessary, not simply to avoid the
paperwork requirements of a full documentation loan.
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