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 600 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.
If you choose 80/20 financing with the seller carrying the
second mortgage, you can qualify with sub-prime lenders with
a score of 560.
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.
To view our list of recommended subprime mortgage lenders
online, visit this page: Recommended Bad Credit Mortgage Lenders
Carrie Reeder is the owner of ABC Loan Guide, an informational
website about various types of loans.