How to Get 100% Financing - Zero Down Mortgage Loans (Even With Bad Credit)
By Nick Graziano
I decided
to write this article today after closing a home purchase loan
for a couple that had some major credit issues. They got into
the house with ZERO down payment, and only had to bring $600
for the closing costs. Their situation was pretty bad, I'm talking
about a bankruptcy 2 years ago, thousands of dollars in outstanding
collections, charge-offs and debt to income ratio of 49%. By
the way, we left all of their outstanding charge-offs and collections
open which means they didn't have to pay any of them off! So
many think they won't be able to qualify for a mortgage loan.
Many will keep thinking they can't qualify until they read this
article.
I have been employed as a Loan Officer for 5 years & I have
experience originating conventional mortgage loans as well as
sub-prime (non-conventional) residential mortgage loans. Many
of the clients that I deal with have great credit (and know
it) and have no problem getting a loan but then there are those
with credit problems (and they know it too). The ones with great
credit are the ones that are easy to close, get the best rates
and all with minimal time involved on the part of myself.
But, this article is for those with credit problems, low income
and those who cannot afford a down payment. I am going to show
you how to qualify for a loan with ZERO down payment, and the
only out of pocket expense will be less than $1,000 ( if any
at all) to cover some of the closing costs. This is just an
example of one particular loan program that I use but there
are numerous others out there. I picked this loan program because
it allows 100% financing down to a 575 credit score
I see it on a daily basis. Everyone wants to own a home and
those with credit problems are calling every mortgage company
in the phone book and applying on every mortgage website out
there. (And there are many out there). Only to find out later
that every time a mortgage company pulls their credit, their
credit score dropped a few points, or that the particular lender
doesn't originate the type of loan that you need. That is frustrating.
Step by Step
Here is where I show you how to qualify yourself for a zero
down loan.
1.The first thing you need is your tri-merge credit score. I
would be more than happy to suggest a few places on the internet
that you could go to get your credit score but I don't want
this article to seem like an advertisement. So, the best thing
to do is to do a search on yahoo.com for terms like "free credit
reports", or "tri-merge credit report". Just make sure that
you end up pulling a "tri-merge" credit report on yourself.
A tri-merged credit report pulls your credit profiles from the
3 major credit reporting companies and merges it into 1 report.
The nice thing about pulling your credit yourself is that it
will NOT affect your credit score. Bookmark this page while
you go get a copy of your credit report and then come back to
see the additional steps.
2.What is your credit score? Most mortgage lenders will use
the middle of the three scores. Example: Your credit scores
are 576, 525, 599. In this case you would use the 576 credit
score since it is not the lowest score and it is not the highest.
3.Is your middle credit score at least 575? If so, congratulations
and move on to the next step. If your middle score is less than
575 you have some homework to do. You can either sign up with
a credit repair company ("search yahoo.com for credit repair")
to try and remove some derogatory items on your credit which
will raise your credit score OR you can try to acquire some
credit to help re-establish your credit worthiness. The easiest
way to re-establish your credit is by either getting a car loan
or credit card designed to help re-establish your credit. Again
search yahoo.com for "credit cards to re-establish credit"
4.Do you have a bankruptcy or foreclosure in your past? Has
it been 2 years since it was discharged? If yes, move on to
the next step! If not, unfortunately in most cases your bankruptcy
or foreclosure will
need to be discharged at least 2 years or you will need to have
at least 5% down payment.
5.You will need to document 24 months of recent mortgage or
rental history. If you rent from a property management company
we will need a Verification Of Rent completed. The form will
be supplied by your mortgage lender or broker. If you rent from
a private landlord, you will need 24 months cancelled checks/
or money order receipts with no payments over 30 days late.
Sorry, you cannot prove your rental history if you pay your
landlord cash every month, unless they are a property management
company. If you are unable to document your rental history there
is a way around it. Get your credit report and look for the
following: Do you have an active credit line on your credit
report that has been open for at least 24 months? Has this credit
line had any activity in the last 6 months? If so, move to the
next step.
6.Look at your credit report. Do you have a credit line that
has a 12 month history reporting? If so and as long as you have
no more that 2x30 day late payments then move on to the next
step.
7.Look at your credit report again. Do any of your credit lines
have a high limit of at least $3,000. If so, move to the next
step.
8.Now take one more look at your credit report. You will need
1 more additional open credit line reporting on your credit
report. (It does not matter how long it has been open or how
much the credit line is for).
Well, congrats! You made it this far which means that your credit
might qualify for a Zero Down Payment Loan. The loan program
you qualified for is subject to change and is subject to additional
conditions.
This article should not be construed as an advertisement to
lend. These are the steps that I go through when trying to pre-qualify
a client that has credit problems. There are many more factors
to determine so please discuss this with a qualified mortgage
professional.
You are probably asking yourself what you are supposed to do
with the information that was given to you in this article.
The first thing is to contact a few mortgage companies. Ask
them if they have any zero down loan programs that will go down
to a 575 credit score, or whatever your credit score is. Remember,
you will need at least a 575 credit score to qualify for this
particular loan program. Also, in order to minimize your out
of pocket expense, ask your mortgage professional if the property
seller is allowed to pay 6% of the purchase price towards closing
costs. If so, you will need to remember to negotiate that into
your purchase contract when you make an offer on a house. Gateway
Mortgage Group