Buying a new home is always a challenge as it is connected with lots of expenses. So that the purchase of real estate does not hit the wallet, many decide on a mortgage. Well, there are some pitfalls you may face with.
- High percentage to pay monthly. Every financial organization proposing a mortgage is not a charitable foundation and it gains its profit from loan percentage payments.
- Additional payments i.e. loan fee, taxes, escrow fee which add up to several thousand dollars.
- The need to additionally take out insurance — PMI, which also costs money.
- And, of course, many are frightened by the famous deposit of 20% of the cost of housing, which must be paid when registering a mortgage agreement.
Besides, do you know that it takes over 21 years on average for an American to save enough money for the down payment? Let’s consider the main stages of mortgage and get some info if there is an option on how to get a mortgage loan without a down payment.
Considering Mortgage Loan in Brief
What steps should you make to get your mortgage loan for your dream house purchasing? All the process can be divided into 4 basic stages you may pass.
Stage 1. Applying for a loan and pre-approval. This step can greatly simplify the process of obtaining a mortgage in the United States. Banking consultants check the financial component of the borrower, determine the possible loan amount and interest rate.
Stage 2. Credit check. At the request of the borrower, the consultants check the international credit history. Additional information may be required from the borrower to complete the credit check.
Stage 3. Providing a package of documents. In different states, the list of documents may vary slightly, but, according to generally accepted practice, it is necessary to collect papers confirming the identity of the borrower, his income, employment and the presence of assets.
Stage 4. Execution (closing) of the transaction. During the closing of the sale and purchase, the borrower signs legal documents, including those relating to the costs required to transfer ownership. At this stage, the buyer-borrower receives all the documentation for the mortgage loan and the keys to the new home.
Everything seems as easy as a cake, yet, you should be aware that every bank wants its money to return so, usually, big banks are ready to loan no more than 70-75% of the assessed value of the acquired property.
So, you may need to accumulate the missing 25-30 per cents on your own. Or find an option without a down payment.
How Can You Get a No-Down-Payment Mortgage?
Let’s define the term previously. A no-down-payment mortgage is a loan you can get without an obligatory down payment. It doesn’t mean, you shouldn’t invest a dime at all as all additional closing payments are required.
You shouldn’t also mistake this type of mortgage with low-down-payment options proposed, for example, by FHA or Home Possible programs as in this case, you need to pay down at least 3% of the assessed value.
What programs are existing now in the US for no-down-payment loaners.
- A mortgage program provided by the US Department of Agriculture that implies 100% financing. This loan program is also known as Rural Housing Loan. It requires the borrower to have a median income or more according to the area statistics. Most of the deals provided by USDA loans concerns buying real estate in rural areas yet you can apply for it when buying a house in some neighborhoods of big cities. There is also a convenient option of no upper limit for loan that mean you can apply for loaning money of almost every sum.
- If you are a veteran or just a member of the US military, consider you are a lucky one. There is a special no-down-payment option provided by VA loans. Its qualification includes veterans and even discharged service personnel of the US military including National Guard Reserves members who have spent at least 6 years in NG. This program also allows spouses of killed on duty soldiers to evaluate the benefits of a no-down-payment mortgage. There are also several other benefits of the VA loans i.e. low mortgage rates and no insurance required.
- One more organization providing zero-down payment mortgage deals is also connected with the military. That is the Navy Federal loan program for navy members, retired officers and their family members.
These two offers allow thousands of American citizen to apply for a mortgage loan without a down payment. Yet, not everyone is eligible for them. And not everyone seeks a mortgage for buying a rural area real estate. If these options do not suit you, well, maybe, it is better to apply for a low-down-payment mortgage option. They are more diverse and flexible.