Can You Buy A Home With No Down Payment?

Coming up with a down payment in today’s economy can be difficult.  In most cases the down payment is expected to be 20% of the purchase price, and in some markets where housing prices are high that can be nearly impossible for the average person to save.  So are there ways to get around this?  Can you buy a home even if you don’t have the down payment?  There are a few ways to get into a home in spite of lacking the required 20%.

The 80/20 Loan

Also known as a piggyback mortgage, an 80/20 loan is a simple way to get a home without a down payment, but it can be a bit more expensive-or a lot more.  Basically, you take out a separate loan for the 20% portion of the purchase price.  You are financing your down payment.  You then take out a larger loan for the remaining 80%.  The interest rate on the 20% loan is usually a lot higher than the larger loan, so the best bet for any homeowner is to pay it off as quickly as possible.

The 20% portion of the loan is usually on a shorter term than the larger portion as well, and may have a balloon payment.  This means, for example, that the loan might amortize over 15 years, but after 10 years a balloon payment is due-meaning you have to either refinance or pay the balance.  There are also some variations on this loan, such as an 80/15/5 loan, where you put down 5%, take out a 15% loan for the rest of the down payment, and then finance the remaining 80% as a standard mortgage.

100% Financing Loans

While this type of loan used to be easier to get, today fewer places offer them.  There are still some places where you can get 100% financing on your home, but be prepared to pay PMI-Primary Mortgage Insurance.  This is something that the mortgage company will charge to protect themselves against the possibility that you will default on the loan.  It is charged on any loan when more than 80% of the value is being financed in most cases.  These 80/20 loans avoid PMI by financing less in one loan.

It is possible to buy a home with no or very little down payment, and there are a few other special programs such as FHA loans out there to help.  Do your research, and be sure you know which option will best fit your budget.

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Calculating Your Monthly Mortgage Payments

One of the most important factors to consider when buying a new home is affordability.  As a general rule, mortgage payments should not exceed 25-30 percent of your monthly take-home pay.  The best way to know what you can afford is to determine the possible payment range by comparing the price of the home with other essential ingredients.

Figure Out How Much You Want To Borrow

Your first step to calculating your monthly mortgage payment is knowing how much you want to borrow.  This can be determined by subtracting your down payment amount from the purchase price of the home, which will give you the amount that you will need to request from a lender.

Know Your Rates

The next step is to determine the current interest rates for the purchase of a home.  Rates vary and may change often, so check with your lender for current rates.  It’s worth noting that the interest rates you receive will, in part, be based on your credit history.  This means that knowing your FICO score and credit rating will give you a good idea as to how your interest rates will be calculated.

Choose Your Loan Term

Your monthly mortgage payments will be determined by a number of factors, including the term of your loan.  If you were to borrow $250,000, your monthly payments would be less with a 30-year mortgage than with a 15-year mortgage.  The reason is because it would take larger monthly payments to get the loan paid off quicker, which is why you will need to select a loan term before calculating your payments.

Additional Costs To Consider

Your total mortgage payment will include taxes, homeowner’s insurance and possibly even private mortgage insurance (PMI) if you provide less than 20 percent down and your loan requires it.

Just The Facts & Figures

Now that you know how much you need to borrow, have chosen your loan term and are familiar with the current interest rates, it’s time to calculate your payment.  Most lenders offer a mortgage calculator on their Web site or you can get an estimate by speaking with your lender.

If you still need help in calculating your potential monthly mortgage payments, don’t hesitate to ask your REALTOR®, mortgage broker or lender.

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Bridge Financing: What Is It?

When it comes time to finance your new home and you still have a loan on another home you own but plan to sell, you are likely to run into the term bridge financing.  This is a special type of financing that can help solve the cash flow problems created by the need to complete the purchase of one home before you complete the sale of the other.

Filling In The Gap

It can be difficult to get the sale of your current home to coincide perfectly with the purchase of the new one in order to avoid a problem with cash flow.  If you have a sale closing in 90 days on the old home, but find that you need a short escrow to close the deal on the new home, this can create a gap in cash flow.

Bridge financing allows you to close that gap and provides for the time period between the new purchase and the sale that will eventually provide the needed cash for that purchase.

Down Payments And More

Most people don’t have enough cash on hand to pay the down payment on a new home prior to closing on the sale of the previous home.  This can make it difficult to buy the home you want when you haven’t yet sold your current home or are still in escrow.

Bridge financing allows you to make the purchase by covering down payments or other costs involved as part of the loan process.  It will cover the difference on the expectation of payment in the near future.

Qualifying For Bridge Financing

Not every purchase transaction will qualify for bridge financing.  In addition to credit requirements, you will need to have a strong expectation of the cash coming in to fund the new loan.  Bridge financing doesn’t guarantee that either loan will go through, and a problem with one loan can usually mean a problem with both.  It is rare to obtain open bridge financing where there is no certain date for the assets to become liquid, since this comes at a high risk

In most cases bridge financing is only used for a very short period of time.  Your mortgage expert can explain the details to you and let you know if bridge financing is an option for your situation.

For many people, this type of financing can make all the difference in the ability to purchase the home they really want while still waiting on the sale of a previous home.

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Avoiding Mortgage Fraud

Unfortunately, fraud and identity theft are increasing at an alarming rate every year, and mortgage fraud is one of the most important types of fraud from which you will want to protect yourself.  So what constitutes mortgage fraud, and how can you prevent this from happening to you?

What Is Mortgage Fraud?

Essentially, mortgage fraud is defined by the FBI as any material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan.  There are several different types of mortgage fraud, and each is a serious offense that can have a huge impact on you and your credit.  Here is a basic list of the most common types of mortgage fraud.

Undisclosed Kickbacks-This includes any financial deals between a buyer and seller that are not included in the mortgage documents.

Falsifying Income-Inflating your income is a serious offense on any loan document, especially a mortgage.

Undocumented Non-Owner Occupancy-Rates and other fees can be higher for income and rental properties, but resist the temptation to hide this fact in order to save money.

Inflated Purchase Price-In some cases this method is used to obtain a higher appraisal of a property, but it is illegal and may cost you your home.

How To Protect Yourself

The purchase of your home will probably be the greatest financial investment you will ever make.  Ensuring that you know what constitutes mortgage fraud is half the job, but it is also important to know how to protect yourself from professionals who may not have your best interests in mind.  In general the best method is to ensure that your real estate agent and mortgage lenders are professionals with considerable experience, professional credentials, and good references.  It is also important to keep in mind that if an offer seems too good to be true, or if you feel that your REALTOR® or lender has given you advice that sounds as if it might fall under the category of mortgage fraud, you seek the advice of another professional. In this way you can avoid getting yourself into what may be a potential financial disaster. Your property is not only your home, but also your greatest asset, and losing it to mortgage fraud can be avoided when you are armed with these facts.

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Applying For a Joint Mortgage Loan With Your Spouse

When you are ready to buy a home, applying for a mortgage is one of the first and most important steps.  For married couples, this usually involves applying for a mortgage loan jointly.  This means that the loan will be in both of your names and you will be co-owners of the house.  While it may seem like the obvious thing to do, there are a few situations when applying with only one name might be wise.  Here are a few tips on joint mortgage applications.

Is Your Credit Looking Good?

If one of you has a poor credit rating, it could strongly affect your chances of qualifying for the loan and will definitely raise the interest rate even if you do qualify.  If the person with poor credit does not make a large sum of money and their income is not required to qualify for the loan, it might make more sense not to apply jointly.

Employment Doesn’t Matter

If one of the partners is unemployed, a stay at home mom or dad or homemaker, or for any other reason, they won’t have much impact on the amount of money you can qualify for.  That doesn’t mean you shouldn’t apply jointly.  First of all, marriage is a partnership, and having the home in both names gives a feeling of equality even if one person makes the income.  Secondly, the person with no income might still have a very good credit rating, making it easier to get the best interest rate!

A Financial Commitment

When you apply for a home loan together, you are connecting yourselves financially in a major way.  Joint mortgage loans aren’t just for spouses; many life partners also purchase a home together.  Just be certain that you are committed to the relationship before you sign mortgage papers.  It can make things very complicated later if you don’t.

A joint mortgage is usually a good choice for any couple, because you can combine your income to get approved for a larger mortgage or a better rate.  Just bear in mind that there are situations when you are better off keeping the loan in one name only, mainly for financial reasons.

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Home & Garden

Low Maintenance Plants For Your Yard

Even if you don’t have a green thumb, you can still have a beautiful yard if you choose the right plants.  Careful choice of what to place in your yard will mean less maintenance.

Plant Native

When selecting the plants for your yard, do some research on which plants are native to your climate.  While exotic plants may look different and interesting in your yard, if they aren’t meant for that area you’ll likely need to spend a lot of time coddling them.

If you live in the desert, it’s best not to choose plants that require a lot of water.  Not only will you have to pay close attention to them, but the cost of keeping them watered will be high-or impossible if you face drought restrictions on water.  Climates with cold, harsh winters aren’t the best place for plants native to warm, tropical climates.  Get to know the plants that grow naturally in your area-odds are good they’ll thrive without much attention.

Plant Hardy Perennials

The best thing about perennials is that you don’t have to plant every year.  When you choose hardy, low-maintenance perennials, they will come back year after year with little effort on your part.

Many species of perennials, including coneflowers and ferns, can survive in a variety of soils and survive even harsh winters.  There are also a lot of ornamental grasses that will provide lovely ground cover with little effort, and will come back year after year to keep your outdoor space green.

Succulents Can Take The Heat

If watering your plants isn’t high on your to-do list, succulents can solve your problem.  While many people picture prickly cacti when they think of succulents, there are plenty of other options that are attractive and can survive a serious lack of water and a lot of hot weather.

While succulents are best suited to hot, dry climates, many will survive frost if you simply cover them over the colder months.  Some of the hardiest choices are Red Yucca and Texas Sotol, both of which can survive weather as cold as 20 degrees Fahrenheit. The key to a low-maintenance yard is to take some time to research which plants thrive best in your climate with little care.  Your local garden shop can help you determine what to plant to avoid a lot of hours of work in your yard and add hours of enjoyment.

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Home & Garden

A Homeowner’s Toolkit: All The Tools You Need To Care For Your Home

Whether you have just bought your first home or have been a homeowner for some time, chances are that at some point you will be faced with home repairs.  While you can always call the local repairman to fix minor plumbing or structural problems, doing the repairs yourself can save you time and money, and with a few tools you’ll have everything you need to make most home repairs.  So what do you need to create a Homeowner’s Toolkit, and to give you the know-how to make the simple repairs yourself?  Here’s a list that includes everything you’ll need!

Home Repair Book-If you know nothing about home repairs, this may be the most important tool you will purchase for your home.  There are a number of great books to choose from, including those in the “For Dummies” series that will not only give you step-by-step guidance, but also tell you the tools you’ll need for each job.

Hammer-This is a basic tool that you will no doubt use dozens of time for everything from hanging pictures to more major repairs.

Screwdriver-This is another basic tool that you will use over and over.  Be sure you get a set with quality grips, and that includes a number of different heads.  The ones with magnetic heads can make getting into tight spaces easier and less frustrating.

Wire Cutter-This handy tool is a must for any basic electrical work you may want to do.

Tape Measure-Be sure you choose one that has sufficient length to cover most spaces in your home, a good quality one with a lock.

Reversible Drill-A ⅜-inch model is one of the handiest tools any homeowner will ever have.  Be sure you pick up a cordless model so you can also easily use it outdoors as well.

Pry Bar-Purchase one that is hexagonal steel rather than spring steel to avoid bounce back when using it with a hammer.

Vise Grips-This handy tool is especially useful for any plumbing you may do.

Needle-nose Pliers-This tool is mostly used for electrical work, but is also useful for getting into tight spaces, and even for crafts.

Utility Knife-This is another one of those multi-purpose tools that is a homeowner essential.  Be sure to pick one up with replaceable blades.

Handsaw-While a circular saw may seem like the better investment, there are a number of cases where a handsaw is the better choice.  They are also much less expensive. Getting started with home repairs can seem like a daunting task, especially if you have no experience, but with the right tools and a little knowledge you can save a fortune while keeping your home in good repair.

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Home Buying

A Home for All Seasons: Year-Round Considerations

Whatever time of year you find yourself shopping for a new home, it’s important to give some thought to what that home will be like throughout the rest of the year.  Be on the lookout for things that could affect the access and comfort of your home through all the months of the year.

Winter Considerations

If you live in an area with heavy snow, it’s important to give serious thought to how accessible your home will be in those months.  Homes on hills might find the roads impassable due to ice, while homes with long driveways will require a lot of snow clearing to get out.

If you are expecting cold winters, the function of your furnace is a vital piece of the puzzle, so be sure the home has a heating system that works well.  You might also look for alternate heating in your home, such as a wood stove or fireplace insert.

Things To Think About In Spring

Spring can often mean a lot of water, whether from those April showers or melting snow.  The drainage on the property is important to making certain that water doesn’t cause problems such as earth shifting or flooding.  Look for things like retaining walls and a slope to the property that allows it to drain.

Spring can also come with a lot of yard work.  Remember that a big yard looks like a lot of fun-and it is-but it also means a lot of work.  A spring cleanup is a must in many areas as it won’t just be the pretty flowers growing in the spring, but those pesky weeds, too.

Summer Thoughts

Summer is the time when most people want to spend time outside, enjoying the sunshine.  It’s also the time when most areas are driest, meaning a lot of watering to keep the plants and grass green.  If you are considering a larger lot, think about the cost of watering it.  You might also want to look for a built-in sprinkler system so you won’t forget to water.

The direction in which the house faces will determine how much sun you get both in the home and in the backyard.  If the yard will get a lot of sun, you might want to look for a home with a covered patio or awning.

Facing Fall

Those big beautiful trees around a property make it look lovely and offer shade.  Come fall they also mean a lot of leaves all over the ground and a lot of work picking them up.

Every season has things that homeowners will have to deal with; before you buy, make sure you’ve given a lot of thought to how that home will take you through each season so you can be prepared.

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All About Home Equity Loans

You have probably heard a lot about home equity loans if you have spent any time at all looking at home financing options.  These are loans that are usually taken out by people who already own a home and want to borrow against the value of the home.  Not everyone can get a home equity loan-of course, you must actually have equity in the home, as well as the right credit situation.  Home equity loans are a great way to finance major renovations on your house.

What Is Equity?

It’s a term that is heard a lot, but for those new to the housing market, it might not be one you exactly understand.  It’s quite simple, really.  The equity in your home is the difference between what you currently owe on it and the current market value of the home.  You can achieve equity in your home in two main ways.  The first is by paying down your mortgage.  The second is by increasing the value of your home, either through renovations you have done or a general increase in the market.

Loans Vs. Lines of Credit

Along with home equity loans, you have probably heard about home equity lines of credit.  While they are very similar, there is one major difference.  A home equity loan is basically like any other mortgage loan.  You take out a loan for the value of the home, and then you pay it back.  When you have paid it off, the agreement is over.

A home equity line of credit is a little different.  It allows you to borrow money against the value of your home in much the same way, but after you pay it off, you can borrow the same amount again.  Think of it like a credit card; you have a certain amount of credit available, and when you pay off what you owe, you can charge more to the card.  A home equity line of credit offers you an ongoing credit line available for any need you might have.

Whichever option you choose, be careful not to borrow too high an amount.  Pushing what you owe on your home back up to the market value can be dangerous.  If there is a dip in the market, you could suddenly find yourself upside down on the home.  If you have borrowed the money to make renovations, however, your improvements can make up some of that difference, building even more equity.

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