It is a dream for every family to be able to have their own home. They try really hard to collect the required amount for down payment. A down payment is the money that the buyer has to pay from his/her own pocket, when buying a house with a mortgage loan. This down payment amount can be as low as 3 to 4%, or as high as 20% of the purchase price of the house.
However, there are many who cannot collect this required amount to be paid as down payment. To help them, there are a few ‘no down payment home loan’ options available. These loans especially cater to those who fall in the low to moderate income groups. It helps them purchase homes in the rural areas. We can say that these loans, help one overcome the obstacle of down payment, and fulfill their dream of purchasing a home.
For The First-Time Home Buyers
In order to qualify for these loans, one needs to meet certain criteria that are laid down by the government. First, a person should have an income of about 115% of the median income of the people who reside in the area, where they are planning to buy a home. Also, the repayment viability should be based on the Principle, Interest, Taxes and Insurance (PITI). The PITI should be divided by gross monthly income, and the result should be less than 29%. Second, the total debt divided by the gross monthly income should be about 41% or less than 41%. You become eligible for this kind of loan, only if these criteria are met.
Apart from these requirements, one needs to show that the home they currently live in is not adequate for the family. This is a test that is based on family size. However, the home you may be buying should be in accordance to the budget and family size. You cannot apply for a mansion when you need just a 4 bedroom home. Another USP for these home loans is that they have no private mortgage insurance. This eventually helps save a substantial amount of cash for the borrower.
There is a unique home loan for veterans, reservists and active duty service members. This is called the VA (Veterans Affairs) loans. These loans are meant for veterans with low or moderate income, and limited funds for making a down payment on a house. They are flexible income loans with flexible credit and debt requirements. The down payments are funded by down payment assistance grants or gifts.
VA Vendee Loans
It is quite obvious that not all who are seeking home loans, will be veterans or seeking homes in rural areas. Therefore for such people who do not qualify as veterans, can apply for VA Vendee home loans. The qualifying criteria for these loans is that, the home you intend to buy should be a VA home foreclosure. If not, then you cannot qualify for these loans. Another important criteria for these loans is that you need to occupy this house for your own use and not use it as an investment purpose. The main drawback for this loan is that, it is very difficult to find a VA home foreclosure.
What If I Have a Bad Credit?
People seeking the above can approach many financial institutions who are ready to overlook their bad credit history. This makes one wonder, why would a bank give a loan to someone with bad credit history. Well, the interest is comparatively higher for no down payment home loans with bad credit. Therefore, you need to weigh all the pros and cons before you go in for these loans. You need to make sure you will be able to repay the loan amount every month for the next 15 to 30 years. The exorbitant interest rates are the biggest deterrents for the first time home buyer with bad credit. So, try to collect the down payment amount yourself, instead of opting for home loans with bad credit.
One needs to make sure they have an income to repay the loan payments every month. Another important criteria is that one needs to prove they have been employed for the last two years. If you meet all the stipulated criteria, you can be eligible for these loans. But make sure you do a thorough research, because the interest rates are slightly higher than the conventional home loans. Therefore, I would just say that think twice before you go in for one for yourself.