Purchasing a home is a tremendous commitment, one that has an impact on your credit and funds like no other purchase could. Acquiring a home is usually regarded as a very good investment. With current interest rates, real estate experts encourage buyers to make a move.
What if I have bad credit?
A bad history of credit can be a more significant hindrance for potential buyers than it had been previously because the current financial meltdown has triggered loan providers to tighten up their requirements for loaning funds as well as providing mortgages.
- Get copies of your credit report and know your credit score.
- Report any errors you find on your reports.
- Begin to rebuild your credit with a secured credit card.
- Make arrangements to pay outstanding debts.
What if I don’t have the down payment?
The vast majority of homes are purchased through mortgage loans, but most conventional mortgage loans require a 20% down payment. What if you satisfy all other requirements but don’t possess the funds for that large sum of money needed for the down payment?
USDA Loans (100% funding)
Generally referred to as ‘rural’ loans, that description doesn’t mean that you have to buy a home down the middle of nowhere — a few suitable locations are actually in remarkably populated settings. Loans via the Department of Agriculture are available to individuals who have a decent credit history and a stable earning that doesn’t go beyond certain median specifications.
Homes in some urban locations are not eligible. The prospective homeowner must not previously own a home. There is no mortgage loan insurance coverage on these loans; however, there exists a 2% upfront fee, which can be rolled into the mortgage loan, as well as an annual fee of 0.5% of the loan balance.
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Guaranteed Housing Loan
The Guaranteed Housing Loan caters to the average income borrower. People who apply may have an income of as much as 115% of the median earnings for the area. The Direct Housing Loan is for low-income households.
Guaranteed Housing Loans are dependent upon the credit and income requirements of both the lender as well as the USDA. Most lenders want borrowers to have at least a 620 credit score without major delinquencies in the past several years.
VA loans (100% funding)
Department of Veterans Affairs loans help veterans and their surviving spouses to purchase a home with no money down. The normal rates of interest tend to be lower than those found in typical mortgage loans. Credit and income requirements are more flexible.
There is a financing charge, which might range from 2.15% to 3.3%, dependent upon the military outlet in which the applicant served, as well as the number of times they have taken out a VA loan. However, that funding fee can be rolled into the total loan.