Tips for Homebuyers Searching for Mortgages with Less Than 20 Percent Down
When many people start buying a house, they assume putting 20 percent down is required. However, this is not the case, and many lenders and mortgage brokers offer options for borrowers looking for mortgages with a small down payment.
Get Pre-Approved for a Mortgage
Before researching mortgages, you’ll want to ensure you have a few things, including solid credit standing and a steady income. The options are out there and exist to make sure that people can buy and invest in real estate, even in today’s competitive housing market and tight credit environment.
Maintain a Strong Credit Score
A credit score is one of the first things lenders look at when determining who is a qualified borrower. Make payments on time, and remember that even small mistakes may take some time to clear from credit scores.
Look Beyond Your Local Banks:
There are many options available outside of traditional bank mortgages. Mortgage brokers offer a wide range of mortgage loans with zero down payments; an example is VA Loans. Veterans of the military and qualified retired veterans are eligible to use this benefit for a 100 percent loan. They also offer FHA loans to qualified borrowers for as little as 3.5 percent down. In rural areas, the U.S. Department of Agriculture offers low down payment options with financing to 100 percent. A good mortgage broker will have all of these options available and will have a variety of lenders to put these through to stay competitive in the market. And even conventional loans can do loans with a 5 percent down payment.
Document Income and Assets
Lenders look for a steady income and sufficient savings to ensure borrowers can meet monthly payments. Ensure all account statements are ready to establish proof of funds; lenders look for savings accounts that indicate the borrower can cover a few months of expenses. In addition, hold jobs for at least two years or within the same industry to demonstrate longevity and stability.
Be Prepared to Pay More Monthly
When you do loans with limited funds down, most will require some mortgage insurance to complete the loan. Conventional loans require Private Mortgage Insurance on loans to values above 80 percent. FHA loans have Mortgage Insurance on all their loans, and the VA only has a funding fee.
Select at least two lenders to be able to compare good-faith estimates. This allows you to look at two completely different options, which will help in talking to more than one source when looking for a mortgage. Before selecting any loan, thoroughly compare the fees, estimates, closing costs, etc.