homeowner loans 4

Are you a first time home buyer, wanting to take advantage of the buyers' market, but you don't have a lot of cash to put down? Or, maybe you're finding that you have outgrown your current residence and you want to move up, but realize that when you sell your existing home, you won't have the equity needed to provide at least the standard 20% down payment. Today's housing market has put more people, than ever before, in the position of needing 0 down home loans. Unfortunately, as the need has gone up for these loans, the choices and opportunities have declined. So what's a home buyer to do?

First of all, if you are a U.S. military veteran, you may qualify for special VA 0 down home loans. Your military service is honored and greatly appreciated, so these loans generally have great rates and no private mortgage insurance (PMI).

If you are non-military, then you will need at least 3.5% to put down for an FHA loan and will be required to pay for Private Mortgage Insurance (PMI). A few banks and mortgage companies have programs requiring as little as 5% or 10% down, but the rates will be higher, your income requirements will be more stringent and you will also have to pay PMI.

PMI is a special insurance that helps to cover the lender's added risk for lending more than 80% of the purchase price of a home. Your actual PMI cost is determined by a variety of factors, but there are two primary factors: First is the loan to value. The less you are putting down, the greater your amount of monthly PMI. With a 5% down payment, you can assume at least an additional 1% of your loan amount to be added to your payment. For example, a $123,500 loan on a $130,000 home would add approximately $103 to your monthly payment ($1,230/12 months). This is a general estimated amount and will vary, so be sure to get your specific amount from your lender.

Second, your credit (FICO) score will alter the amount that you have to pay. Any score under 700 will add dollars to your monthly cost. It is very important that you ask your lender for the specific cost prior to even applying for the loan.

Before applying for any loan, be sure to have your finances organized:
• Have a clear understanding of your source of funds for the down payment and monthly payments.
• Pull a free copy of your credit report to so you can clear up any discrepancies and can communicate any concerns prior to filling out a loan application.
• Know how much you can afford by completing a detailed budget. Don't let a loan officer tell you how much you can afford. Only you can determine your level of borrowing comfort!

Unfortunately, for the general population 0 down home loans may be a thing of the past. But, with careful planning, properly managed credit and a clear understanding of your total mortgage costs, home ownership can still be your American dream.