By Jon Silver
Home sales are increasing and interest rates have been increasing in 2017, but lenders are introducing new house loans for people with no credit. This could be a great time to buy your next home before interests climb more on good economic news.
If you are thinking about a new home in 2017, here are some of our best house loan tips to snag you a great deal:
Remember the bad old days of 2009 after the market crash? Twenty percent down payment mortgages became commonplace again. Low down payment and no down payment longs withered away. Much has changed in the house loans market in 2017. Today, while you will get the best possible terms with a 20% down payment and stellar credit, you have many low down payment options, and even a few no down payment ones too.
The most popular low down payment program in the US today is the FHA loan. These house loans are made by private lenders that are approved by FHA. FHA insures the loan against default. If you don't pay, FHA will reimburse the lender. This assurance from FHA allows creditors to extend favorable credit terms to people with lower down payments and lower credit scores.
FHA allows down payments as low as 3.5%. If you are a military member or veteran, you can even qualify for a 100% financing loan from the Veterans Administration.
For those who are buying a home in a rural area, U.S. Department of Agriculture offers USDA loans with 100% financing and flexible credit requirements. You only need to be getting a house loan in a rural area to qualify.
Navy Federal Credit Union also has 100% financing mortgages for military members to buy their primary residence.
Some conventional lenders are now offering 3% down payment house loans as well to those with average credit.
Tip – Shop around and see which lender will offer you the best deal in terms of down payment. You can have your credit run for a house loan multiple times within 30 days and it only counts as one credit inquiry on your credit report.
FHA remains the best bad credit option for house loans in 2017. FHA's goal is to bring homeownership into reach for more Americans. It is widely understood that homeowners take better care of their residences than renters do. Homeownership tends to improve communities, so the government wants to encourage it as much as possible.
Also, homeowners spend money on maintaining their homes, and this stimulates the economy. Thus, FHA has very flexible credit options for people who want a house loan with no credit and in many instances, loans for people with bad credit scores.
How bad? Did you know that you can get a mortgage through FHA with a 500 credit score? Admittedly, this will be difficult, but people with credit scores over 600 and proof of income can usually be approved through an FHA approved lender.
You do need a credit score of at least 580 to get approved with a 3.5% down payment.
Tip – Try to get your score at least into the low 600s so that you can apply for a low money down FHA house loan.
Before 2008, many Americans bought as much home as they could afford under the theory that they would make more money later. We advise today that it is a better idea to live well within your means. It is better to wait until your income has definitely gone up before buying a more expensive home. Or, wait until your income increases and then rehab your existing home.
Even though lending criteria today is stricter than a decade ago, it still is possible to buy more home than you can really afford. You may be able to 'afford' the loan according to the lender's debt to income calculations. But what if you have no money left over each month for entertainment? No, it is better to live well within your means and to carefully calculate your total monthly expenses and income before committing to a mortgage.
You will usually have 3% to 5% of the loan value in closing costs. This will allow you to usually get a lower interest rate. But if cash is tight, you may want to take a higher interest rate and have the lender pay the closing costs.
For instance, if you are offered a rate of 4%, you might pay a rate of 4.25% to have the lender cover your closing costs.
No closing cost loans have appeal to people who want to sell their home within 3 to 5 years. If you want to stay longer, we advise going ahead and paying the closing costs at closing.
House loans can take longer today than they did a decade ago. Lending criteria is stricter, and government regulations are tighter. You should keep your finances as stable and as 'dull' as possible between mortgage application and mortgage closing.
Do not make the error of going on a shopping spree on credit cards when your loan is approved. Most lenders will run your credit again just before closing to make sure you have not undergone a financial calamity. If you run up $10,000 in credit card debt, this could cost you. Sometimes, it will affect your debt to income ratio so much that the loan falls through.
Also, do not open up new credit lines during the underwriting process, as this can complicate matters.
You should not empty your savings account to buy a new home. Even though some lending programs, such as FHA, do not require financial reserves to qualify, you still should have at least several thousand dollars in a rainy day fund after you close.
If you follow our simple tips above, you will be able to get a home loan that is affordable and with a low rate.
FirstTimeHomeFinancing.com does not offer home mortgages for consumers. This is a website that offers information about house financing and does not guarantee rates or pre-qualification directly or indirectly through representatives or agents. FirstTimeHomeFinancing.com provides a news and information service by offering editorial content related to the housing and mortgage industry.
Copyright © 2000-2017 and Beyond - All rights reserved. FirstTimeHomeFinancing.com