In this special report, I want to share with you a unique way to buy a home with no money down at all, and even how to get cash back at settlement. Plus, you will still have equity in the property. This program will work if you are buying a home for yourself to live in, or if you are buying a rental property.
Let’s start off by looking at the typical “nothing down” approach that the real estate gurus teach. It almost always involves the seller carrying a second mortgage on a property. If you talk to real estate agents about buying a property with nothing down, they will often laugh at you. They expect that you will have money for closing costs, including state and local transfer taxes, pre-paid escrow items, pre-paid interest, mortgage loan fees, settlement charges, title insurance and other items. While many lenders will let the seller pay up to 6% of the settlement costs, for many people they do not qualify for 100% financing, whether it is for a property to live in or as an investment property. It is often impossible to buy a property with no cash or minimal cash when you are trying to get financing from a lender. Plus, when you do get 100% financing from a lender, the interest rate is often at the highest end of the scale, and there is no equity left for the lender in the event of a foreclosure. Thus, your payments may be too high either for you to afford to live in the property or from a cash flow position if you are purchasing the property as an investment.
Assuming that you can afford the payments on a 100% loan, most lenders require that you have a 580 or a 600 middle score (a middle score is the middle of your 3 credit bureau scores) in order to get 100% financing if you are going “full doc”. This means that you are providing 2 years worth of tax returns and 2 months’ current pay stubs or checking account verification that income is going in to your bank account. Other lenders will want to see 6 to 12 months’ of bank statements to support the income you are claiming. If you can’t do this, you often have to go with a “stated income” mortgage, which lets you state what you make without having to prove it. Note that it is illegal to lie about your income. In fact, if you do and the loan goes into default and gets investigated, if your tax returns show that you told the mortgage company something different than you told the IRS, you can actually go to jail for committing mortgage fraud.
One of the things that can keep you from getting a loan is having too much credit card debt. Mortgage companies use a ratio known as your “debt-to-income” as a guideline. Most lenders require that your DTI, as this ratio is known, be less that 50% for high loan-to-value, or LTV loans. So, even if you have the credit for 100% financing, you may still need to pay off some debt to get your ratio in line. We have a program that can do that. Once you understand how this program works, you can solve almost any obstacle in getting a home, other than having the ability to repay the loan of course.
But, back to the stated income loan. To get these kind of loans for 100% of the purchase price, you need to have at least a 640 middle score. And that is if you are actually living in the property. If you want the property as an investment and you tell the lender that you intend to live in it, you are also committing mortgage fraud, and can still go to jail. To qualify for 100% financing for an investment property, you often need to have at least a 700 middle score, plus have at least 2 months’ of payments in reserve. This makes it very difficult to purchase an investment property with nothing down.
So, how do you buy a property with nothing down, going with a conventional mortgage?
Continued in No Deposit Home Loan Part 2
- No Deposit Home Loan Part Two
- Note, this is a continuation of No Deposit Home Loan Part 1 so, if you have not read that yet please do so first. So, how do you buy a property with nothing down, going with a conventional mortgage? Through a program that provides private contributions out of the seller’s equity. Here is an example. Suppose
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