How to get a no money down mortgage

Jul 21, 2011

Getting zero down mortgages used to be a relatively straightforward proposition. When the property market was booming, there were many banks and lenders who were willing to lend you 100 percent - or more - of the value of a home. After the sub-prime mortgage crisis of 2008 and 2009 and the decline in real estate value which resulted from it, banks have become much more selective in who they lend to and many are requiring down payments as high as 20 percent. No money down mortgages can still be found but it is a much more challenging proposition.

Ensure impeccable credit

If you want to have any hope of getting a no money down property loan, you are going to have to convince the lender that you are not a credit risk. Lenders are going to be taking a huge risk when they lend you 100 percent of the value of your home. You will have no equity or ownership interest and if the home price falls, the bank could end up with a situation where you owe more than the house is
worth - leaving them with insufficient collateral. In order for a bank to take on this risk of a zero down home loan, you will need to have a great credit score. To get a great credit score, this means paying your debt on time all the time and having a good mix of credit cards and other types of loans.

Provide solid proof of income

If you are seeking a no down payment mortgage, you better be able to convince the bank that you have the means to repay the money you are borrowing. This means having solid and substantial proof of your income and assets. Two years of tax returns or pay stubs and proof of money in the bank are going to be key.

Consider an 80-20 loan

One option to consider when seeking no money down home loans is an 80- 20 mortgage where you actually take two loans out. One is for 80 percent of the home and the other is for the traditional 20 percent that would normally be required as a down payment. Structuring your loan in this way makes it easier to get and helps you to avoid having to pay private mortgage insurance (PMI).

How to get new home loans

Whether you are purchasing a new home loan or looking for refinance loans, getting new home loans can be a challenge. after the foreclosure and sub prime lending crisis that occurred in 2008 and 2009, bankers have become more stringent on requirements for home refinancing or home loans and you must show that you aren't a credit risk if you want to refinance homes or get the best refinance rates.

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