Buying a Home with Zero Down Payment in Irvine

Years ago, the only person that could buy a home in Irvine with zero down payment using a new purchase money loan were Veterans of War (called a VA loan). In the past several years, there has been an explosion of new loan programs designed to fit most any buyers circumstances. Today, most anyone can buy a home with zero down payment if they have sufficient income and decent credit.

There are three factors that determine if you have sufficient income to purchase a home with zero down payment, and they are: Purchase price of the home, Interest rates, and debt to income ratio that the mortgage program requires. These three factors are interrelated as described below.

The debt to income ratio is the monthly mortgage payment of the zero down loan, divided by your monthly gross income (not your net take home income). This ratio can vary from 35% to 50% dependent upon the loan program, and your credit score. The monthly mortgage payment is determined by the purchase price, current interest rates, and the type of mortgage program, such as 15 versus 30 years, fixed versus adjustable interest rate, etc. There is another ratio that mortgage lenders look at which is the total debt to income ratio which is too complicated to discuss here. This ratio also analysis other debts that you may have such as car payments, credit card payments, etc.

You�re your credit rating is reported by three different reporting agencies called Experian (formerly TRW), EquiFAx, and TransUnion. Your rating is boiled down to a single number, called your FICO score. An excellent FICO score would be about 800 and higher, and good score is about 700 to 800, an average rating is about 600 to 700, and a poor FICO score is below 600. Some mortgage lenders even have some zero down loan programs for borrowers with poor credit ratings at somewhat higher interest payments and lower debt to income ratios.

We are sometimes asked if you can buy a home with no money at all. The answer is no under most circumstances. Even thought the down payment is zero, there are sill some closing costs. Closing costs are typically comprised of loan origination fees, loan processing fees, possibly loan points, Appraisal fee, ALTA title policy, and escrow fee. But there are other options.

We can sometimes negotiate with the seller of the home to pay for a large part of your closing costs. Our best result to date, is we helped a buyer purchase a Condo in Irvine and their total out of pocket cash expense was $795! The buyer was a single woman, who was a first time buyer, using a zero down loan that we found for her, and her credit was average. We were able to convince the seller into paying for all of her closing costs except for $795. That home owner now has over $50,000 equity in her home which she can keep tax free if she were to sell that home today!

by Vincent Bindi