Can I Really Buy A Home With Zero Down?
Buying a house with zero down
“Chris, can I buy with a %100 financing with ZERO down?”
Absolutely, people can qualify and have no money out of their pocket. How does that work? We offer 3 different Down payment assistance programs. Sometimes a borrower will qualify for one program but not another. A proper evaluation of your circumstance can help figure out your options. Most programs have a 640 Fico score requirement, though 1 offers a 620 score, but will not offer as much assistance and at a higher interest rate. All these down payment assistance programs have a slightly higher interest rate (ranging from ½ % to 1% higher than your standard FHA interest rates). If you do have a down payment, using your money might be a better option for you.
The Debt ratios for most down payment assistance programs are 45% of a borrower’s gross income. For a standard FHA loan with the down payment coming from the borrowers own funds or gift funds – the debt ratio can be 56.99%. The loan amount that the borrower qualifies for changes dramatically also. For those that do not have the funds at this time, these programs can be excellent choices to help get your foot in the door to owning your own home!
With a 640 FICO score and documentable income we can offer a ZERO Down payment home loan. We can often even offer closing cost assistance on top of the down payment. Resulting in from zero out of pocket to sometimes just a few thousand dollars out of pocket. The purchase price is the factor that will determine if we have enough funds or if the borrower will be required to pay some. As an example: If closing costs (which change based on the month of the year you close due to property taxes and the actual loan amount) are $8,000, and you have a $200,000 purchase, and we can get a 3% toward the closing costs, that would only be $6,000, leaving a shortage of $2,000. If the loan is $300,000 the closing costs maybe $8,500 but that same 3% would provide $9,000 in closing costs due to the higher loan amount!
Some key features and requirements for First Time Home Buyer status for some of these programs (but not all).
• A first time home buyer is “NOT” a person that has never owned a home. A First Time Home Buyer is someone who has not owned a home for the last three years.
• Sometimes we have down payment assistance and, on some programs, closing cost assistance also. Often we can get the seller to pay some or all of the closing costs through in today’s hot real estate market. It is becoming increasingly more difficult.
• There’s a lot of different combinations here but here’s the simple formula that most people need. There are also income limits for some programs, and the limits change based on the county. Many have generous limits such as the Inland Empire’s $128,700 annual income cap.
• Some programs with providing a 2nd mortgage (at 0% interest) for down payment and a 3rd mortgage for closing costs (at 2.5% interest), but there is no monthly payment requirement. They are called silent loans. You pay the money back when you either sell the home, refinance the loan or at the end of the 30-year loan term.
• Other programs will give you the money as in GRANT – FREE MONEY –. Never have to pay it back (that’s the best kind of free money!) as long as you make all of the payments on time for three years, others give you the free money with no catches of any kind and still others ask you to pay it back over 10 years at zero percent interest or 30 years at 5% interest.
Since there are so many options and great availability, it’s wise to crunch all of the numbers and weigh the pros and cons to figure out which is best for you in the short term and which is best in the long term, how long are you going to keep the house, etc.
So next time you hear that there are zero down payment programs available and you’re not sure what to do, call Chris The Mortgage Pro at 310-350-2546 and he’ll help you Fire Your Landlord!®