Bad Credit No Money Down Mortgage

No down payment loans require little or no cash from the purchaser at the loan closing.

Though PMI (or private mortgage insurance) is normally mandatory on any loan with less than 20% equity in the home, some mortgage programs will allow you to lower pricey mortgage insurance.

Low down payment programs can be a fine idea for first time home buyers or those who would rather use the cash for other purposes.

The average down payment for a house 20 plus years ago was 20%. Today, it's normal for people to put as little as 4% down on their new home. Basically, a no down payment mortgage is a home loan for which you don't put any money down to buy your house. In post recession market, finding a no down payment mortgage could be hard unless you are a pro and/or eligible for a VA loan. VA loans usually don’t require a down payment. That being said, low down payment mortgages, like an FHA loan, tend to be very popular.

No down payment mortgages for vets and low down payment mortgages for bad credit are now a tend to be more ideal for both clients and lenders.

Bad Credit and No Down Payment Mortgage

A popular choice for homebuyers with bad credit is the "no down payment mortgage." Some FHA mortgages only requires a 3.5% down payment. And using PMI, you can often buy down your monthly mortgage insurance, guaranteeing a lower payment throughout the life of your home loan.

Is a No Money Down Mortgage Loan for you?

For some people, a no money down home loan may be the only way to buy a home. First-time home purchasers often have a hard time saving up for a 20 percent down payment, or they might consider using the money they have saved for other things like buying furniture or something.

By not investing a lot of money toward a down payment, you have the option of using your cash for other things such as paying off or consolidating debt to fix bad credit. It’s a smart financial move because mortgage interest is usually tax-deductible and rates are lower than most credit cards.

Don’t Pay Ridiculous Amounts for Private Mortgage Insurance

There are some down falls to a low down payment mortgage, one of which is paying PMI, or private mortgage insurance. Anyone who doesn’t put up 20% plus of the home's value usually ends up paying PMI. That being said, there are ways to lower this expense:

Though PMI is usually a requirement on any loan with less that 20% equity in the home, you may find mortgage programs that allow you to lower your PMI. The way it works is that you pay a portion of your PMI upfront. This can significantly lower your monthly PMI for as long as you want to keep your loan in place. It’s somewhat the same as when people lower their mortgage by paying for points. The point is you can do the same with your private mortgage insurance.

Often times borrowers can eliminate PMI once they've reached a set level of equity in their home. This amount varies depending on the lender, but it is often around twenty percent. As of July 29, 1999, it’s actually required by law for lenders to cancel private mortgage insurance once a borrower has reached 22 percent equity. That said, it is common practice for a homeowner to request PMI be removed once they’ve reached the twenty percent mark. If the homeowner doesn’t have bad credit, this is a very real possibility.

If all else fails, there are other ways to get your 20% down payment, or “No Money Down Refinance.” For example, some loans allow for down payments to come from sources such as monetary gifts given from relatives or even employers. You might be able to draw from a trust fund or a retirement account, or use money you inherited. You should know that pulling money from some sources such as 401k’s may cause you to be penalized for making withdrawals.

It's important to consider all these factors when shopping for no down payment refinance or low down payment mortgages. Shop around, as there are many lenders out there to choose from.