There are still 100% loan programs in the Mortgage Market Place.
One of the best is VA.
I wanted to give you a quick breakdown of the good and the bad for a VA loan…
VA purchase loans allow a qualified borrower to buy a house with no down payment. This is one of the very best loan programs in the mortgage market today. If you are a veteran you should definitely try to take advantage of this program.
What it takes to qualify for VA:
You should be a veteran. You will need a Certificate of Eligibility from the VA. If you don’t have your Certificate of Eligibility you can apply for it at this web site: http://www.vba.va.gov/pubs/homeloanforms.htm.
Credit:
The VA has no minimum credit score listed in their guidelines. However, the banks and lenders that write the VA loans have their own guidelines for acceptable credit scores.
Generally these banks have a 620 minimum credit score cut off. There are a precious few that still go down to 600 at the time of this writing. …but I have NO minimum score with my VA loans!
Chapter 7 Bankruptcy: The discharge must be at least 24 months old. Borrower needs to have reestablished good credit with at least 3 trade lines containing 12 months of clean payment history. No late payments after bankruptcy are allowed.
Chapter 13 Bankruptcy: If the borrower has made 12 months of payments to the trustee with no late payments, and Trustee gives his permission for the new credit, the lender may give an approval.
Foreclosure: A borrower whose previous residence or other real property was foreclosed on or given a deed-in-lieu of foreclosure within the previous two years since the disposition date is generally not eligible for a VA insured mortgage. If the foreclosure was on a VA loan, the applicant may not have full entitlement available for the new loan.
Clear CAIVRS: The government doesn’t like it when you have defaulted on a government insured loan. They have a database called CAIVRS that they check to see if you have ever defaulted on any government insured loans. These can be student loans, or other mortgages.
Debt to Income Ratio: The standard maximum debt to income ratio that the VA allows is 41%. In other words you take your gross monthly income, and divide it by the house payment plus your minimum payment on your other recurring monthly debt. The resulting number should be 41% or less.
It’s possible to exceed the 41% figure with an automated approval, but the underwriter will generally not exceed 41% on a manual underwrite.
Advantages of VA:
No down payment is required. The VA loan will finance 100% of the purchase price up to $417,000.
No monthly mortgage insurance. There are only four elements to a VA payment: principle, interest, taxes, and hazard insurance. The VA doesn’t charge a monthly mortgage insurance.
The VA will charge an initial up front “funding fee” at closing. This is a onetime premium paid to the VA at closing for mortgage insurance. It’s currently 2.15% (2.15% x loan amount) for a first time buyer using the 100% financing loan program. The funding fee for second time users who do not make a down payment is 3.3%.
It’s credit friendly! This is one of the most forgiving loans in the mortgage market when it comes to lower credit scores, or other credit challenges.
Low rates! The VA program has very competitive interest rates that rival FHA and conventional loans.
Generous allowable seller contributions. The VA allows the seller to pay the buyers closing costs, and pre paid expenses (taxes, interest, and insurance) up to 4% of the sales price. You would need to ask for this help when you make your offer to purchase the property.
Disadvantages of VA:
There really are no disadvantages to a VA loan. You just have to be an eligible veteran to qualify for one.
If you are a veteran and want to buy a house – give me a call or shoot me an email! I love to help veterans!
Have a good day! …and thanks for reading.
Brett