|How to Get 100% Financing - Zero Down Mortgage Loans
(Even With Bad Credit)
I decided to write this article today after closing a home purchase loan for a couple that
had some major credit issues. They got into the house with ZERO down payment, and only had to bring
$600 for the closing costs. Their situation was pretty bad, I'm talking about a bankruptcy 2 years
ago, thousands of dollars in outstanding collections, charge-offs and debt to income ratio of
49%. By the way, we left all of their outstanding charge-offs and collections open which means they
didn't have to pay any of them off! So many think they won't be able to qualify for a mortgage loan.
Many will keep thinking they can't qualify until they read this article.
I have been employed as a Loan Officer for 5 years & I have experience originating
conventional mortgage loans as well as sub-prime (non-conventional) residential mortgage loans.
Many of the clients that I deal with have great credit (and know it) and have no problem getting
a loan but then there are those with credit problems (and they know it too). The ones with great
credit are the ones that are easy to close, get the best rates and all with minimal time involved
on the part of myself.
But, this article is for those with credit problems, low income and those who cannot afford
a down payment. I am going to show you how to qualify for a loan with ZERO down payment, and the
only out of pocket expense will be less than $1,000 ( if any at all) to cover some of the closing
costs. This is just an example of one particular loan program that I use but there are numerous
others out there. I picked this loan program because it allows 100% financing down to a 575
credit score I see it on a daily basis.
Everyone wants to own a home and those with credit problems are calling every mortgage
company in the phone book and applying on every mortgage website out there. (And there are many out
there). Only to find out later that every time a mortgage company pulls their credit, their credit
score dropped a few points, or that the particular lender doesn't originate the type of loan
that you need. That is frustrating.
Step by Step
Here is where I show you how to qualify yourself for a zero down loan.
- The first thing you need is your tri-merge credit score. I would be more that happy to suggest
a few places on the internet that you could go to get your credit score but I don't want this
article to seem like an advertisement. So, the best thing to do is to do a search on yahoo.com for
terms like "free credit reports", or "tri-merge credit report". Just make sure
that you end up pulling a "tri-merge" credit report on yourself. A tri-merged credit
report pulls your credit profiles from the 3 major credit reporting companies and merges it into
1 report. The nice thing about pulling your credit yourself is that it will NOT affect your credit
score. Bookmark this page while you go get a copy of your credit report and then come back to see
the additional steps.
- What is your credit score? Most mortgage lenders will use the middle of the three scores.
Example: Your credit scores are 576, 525, 599. In this case you would use the 576 credit score
since it is not the lowest score and it is not the highest.
- Is your middle credit score at least 575? If so, congratulations and move on to the next step.
If your middle score is less than 575 you have some homework to do. You can either sign up with a
credit repair company ("search yahoo.com for credit repair") to try and remove
some derogatory items on your credit which will raise your credit score OR you can try to acquire
some credit to help re-establish your credit worthiness. The easiest way to re-establish your
credit is by either getting a car loan or credit card designed to help re-establish your credit.
Again search yahoo.com for "credit cards to re-establish credit"
- Do you have a bankruptcy or foreclosure in your past? Has it been 2 years since it was
discharged? If yes, move on to the next step! If not, unfortunately in most cases your bankruptcy
or foreclosure will need to be discharged at least 2 years or you will need to have at least 5%
- You will need to document 24 months of recent mortgage or rental history. If you rent from
a property management company we will need a Verification Of Rent completed. The form will be
supplied by your mortgage lender or broker. If you rent from a private landlord, you will need 24
months cancelled checks or money order receipts with no payments over 30 days late. Sorry, you
cannot prove your rental history if you pay your landlord cash every month, unless they are a
property management company. If you are unable to document your rental history there is a way
around it. Get your credit report and look for the following: Do you have an active credit line
on your credit report that has been open for at least 24 months? Has this credit line had any
activity in the last 6 months? If so, move to the next step.
- Look at your credit report. Do you have a credit line that has a 12 month history reporting?
If so and as long as you have no more that 2x30 day late payments then move on to the next step.
- Look at your credit report again. Do any of your credit lines have a high limit of at least
$3,000. If so, move to the next step.
- Now take one more look at your credit report. You will need 1 more additional open credit line
reporting on your credit report. (It does not matter how long it has been open or how much the
credit line is for). Well, congrats! You made it this far which means that your credit might
qualify for a Zero Down Payment Loan. The loan program you qualified for is subject to change
and is subject to additional conditions.
This article should not be construed as an advertisement to lend. These are the steps that
I go through when trying to pre-qualify a client that has credit problems. There are many more
factors to determine so please discuss this with a qualified mortgage professional.
You are probably asking yourself what you are supposed to do with the information that was
given to you in this article. The first thing is to contact a few mortgage companies. Ask them if
they have any zero down loan programs that will go down to a 575 credit score, or whatever your
credit score is. Remember, you will need at least a 575 credit score to qualify for this
particular loan program. Also, in order to minimize your out of pocket expense, ask your mortgage
professional if the property seller is allowed to pay 6% of the purchase price towards closing
costs. If so, you will need to remember to negotiate that into your purchase contract when you
make an offer on a house.
About the author:
Gateway Mortgage Group
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