Sub Prime Lenders
Sub-prime lenders now offer financing packages
with zero down. Interest rates are higher on these types of loans, but they make
purchasing a house easier. And unlike a conventional loan, there is no private
mortgage insurance required. There are two types of zero-down mortgage packages,
each with their own requirements.
Types Of Zero-Down Loans
100% financing, as it names implies, offers complete financing of your property.
The other option, 80/20, finances your mortgage with two loans. Both loans may
be carried by your lender, but sometimes the seller or a second lender is
required to carry the 20% mortgage.
100% financing is easier to deal with, but not all lenders will offer this type
of home loan. 80/20 financing is more common, but takes some negotiation if the
seller is involved.
Qualifications For Zero-Down
Each lender has their own criteria for determining who will qualify for a
zero-down loan. Most sub-prime lenders require any bankruptcies or foreclosures
to have been at least twelve months ago. A conventional loan requires these to
be discharged two to four years ago.
While a credit score of 580 or higher is best, large cash reserves can also
qualify you. Six to twelve month's worth of cash reserves in the form of
savings, money market, or other liquid assets are considered ideal. However
there are many lenders that will only require 1 to 2 months worth of
PITI
in your account 60 days prior to closing
If you choose 80/20 financing with the seller carrying the second mortgage, you
can qualify with sub-prime lenders with a score of 520.
Zero-Down Sub-prime Lenders
You can find zero-down sub-prime mortgages with both conventional and niche
sub-prime lenders. Make sure that you request quotes from as many mortgage
lenders has possible to be sure you find the lowest rate and best terms.
You will also want to decide what type of mortgage you want. An ARM is easier to
qualify for and has lower rates. A fixed rate mortgage offers the security of a
constant interest rate over the life of your loan.
Typically an ARM will be a better deal if you plan to refinance within a couple
of years. After you have improved your credit history, you can refinance for a
conventional mortgage with low interest rates.
Mortgage Glossary3
