Financing your mortgage

Financing your mortgage: zero-mortgages and “hard-money” lenders

If you want to buy a house, whether it’s to live in it or rent it, you need to know how you’ll afford it beforehand, of course. Looking for financing options isn’t easy, but here are some common options to consider.

“Hard-money” lenders

These private lenders are usually regarded as a risky option. On one hand, they offer to finance the total (or the big part) of your home purchase, sometimes without even checking your employment state or tax returns. On the flip side, they are known for their short terms and higher interest rates.

You can highly benefit from these lenders’ offers if you plan on buying a house that will gain 30% in 18 months. You need to be sure of it, or else you may end up losing money. Your goal should be paying your lender back in full ASAP, so as to avoid interest rates.

You should also think about the interest rate if you choose a mortgage loan. Here’s what can change its interest rate!

Zero-down mortgages

You may have heard of these loans before, even though they’ve become more unusual since 2008. They were offered by big lenders and didn’t require any upfront payments. In other words, you didn’t have to make a down payment before receiving the loan. In the last few years, however, zero- and almost-zero-down mortgages slowly started to return to the market.

Companies like Bank of America and USDA (United States Department of Agriculture) offer this kind of financing. The first one lets only highly qualified borrowers apply, which means you should start looking for ways to improve your credit score if you want to qualify! Here are the best credit cards to do it. Regarding the USDA, you should research if they offer zero-down financing in your area, even if it’s an urbanized one.

If you’re a veteran or a family member of one, you can check the zero-down financing offered by the VA and the Navy Federal Credit Union. Keep in mind that many of these programs could charge a small portion of each periodic loan payment as a servicing fee, in order to make up for the lack of down payment.

There are also state and local governments where you can also ask for zero-down programs if you’re a first-time buyer. You may have to meet certain requirements related to the house’s use, such as living in it for a while, and to its location. Sometimes, the closing costs are included in the loan balance. However, you may need private mortgage insurance (PMI), which isn’t tax-deductible.

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