The Death of the 0% Down Payment Option
The Death of the 0% Down Payment Option
There won’t be any more opportunities to buy a home and put 0% down. That train has come and gone and crashed. Although the housing market is struggling, there still is a market. If you are in the market for a new home, here’s what you’ll need to know about the down payment.
The 3% Down Payment Option
The 3% down payment will soon become the 3.5% option as of January 1, 2008. These loans will be offered through the Federal Housing Administration. If you choose this type of FHA loan, you can expect to pay a slightly higher interest rate. When you get an FHA loan, you will also need more mortgage insurance. FHA loans are also somewhat credit-sensitive. This means, the lower your credit score, the higher your interest rate will be. FHA mortgages are a good option if you can’t scrape together more than 3% or 3.5% of the home’s purchase price.
The 10% Option
If you can pull together 10% of your home’s purchase price, your home-buying outlook begins to look a lot better. You will have more lenders competing for your business with an increased down payment. This could mean lower interest rates and lower fees. The bigger your down payment, the more equity you have to start with as well. Because you still aren’t putting down 20%, you will still have to pay private mortgage insurance. For a $200,000 home, private insurance will add about $90 to your monthly payment or cost you about $1250 more per year.
The 20% Down Payment Option
Things are really going to look up for you if you can scrape 20% of the home’s purchase price together. Those people who are able to buy their home with one-fifth of the total purchase price in cash are able to “ride out” the mortgage crisis. However, you won’t see a big decrease in the interest rate you’ll get when you put 20% down instead of 10% down. In fact, you will get a slightly lower rate if you only put 10% down because the mortgage company is somewhat protected by the private mortgage insurance.
Take all of these options into consideration if you are in the market for a new home these days.
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Insured by the National Credit Union Administration
Insured by the National Credit Union Administration
I worked at a federal credit union for several years in college. There seemed to be a general abhorrence of credit unions by many people. I often heard the comment, “I need insurance on my money. That’s why I will never use a credit union.” Hearing this always made me laugh. What these people didn’t seem to realize is that credit unions are insured, just as much as banks are.
Credit Unions are insured by The National Credit Union Administration. This is a separate United States federal agency. NCUA supervises and charters federal credit unions. It also insures savings in federal and most state-chartered credit union institutions nationally. The insurance is backed by the National Credit Union Share Insurance Fund or NCUSIF. Some people also don’t realize that the NCUSIF is a federal fund that is backed the “the full faith and credit” of the United States government.
It is important to note that just as all banks aren’t insured by the FDIC, all credit unions aren’t backed by NCUA. There are 8,101 federally insured credit unions as of December 31, 2007. Collectively, these credit unions held more than $753.5 billion assets, loans of $526.9 billion, and had almost 87 million members. As you can see, the trend towards using credit unions instead of banks is increasing.
The President of the United States appoints a three member board to govern the NCUA. The Senate must also confirm each appointment. Typically, each board member serves six years. Often times, board members remain in office until their successor has been named, appointed, confirmed and sworn in.
President Franklin Delano Roosevelt signed the Federal Credit Union Act in 1934. This act helped charter all credit unions in all states. Again, this act was created to help stimulate a badly weakened economy from the Great Depression. This federal law sought to “make credit available and promote thrift through a national system of nonprofit, cooperative credit unions.”
If you use a credit union, chances are that your money is insured by the NCUA. Double check to make sure your money is protected. “Share” accounts (checking and savings accounts) are federally insured under the Standard Maximum Share Insurance Amount (SMSIA) up to $100,000. IRA accounts and Keogh account limits have recently been increased to $250,000.
As you can see, credit unions are a smart alternative to banks. They offer many of the same services as banks do, but with lower interest rates and better fee schedules. Make sure you are using a credit union that is insured by the NCUA to prevent losing everything that you’ve worked so hard for.
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The Top Ways Your Credit Can Affect Your Mortgage Application
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Everyone dreams of having their own home one day. Many people start out in an apartment and dream of what it will be like when they can finally get a home of their own. Others start out in a small starter home and count down the years until they can make it into a newer, nicer and bigger home. No matter what the circumstances are to begin with, your credit score and credit report can either help you into the home of your dreams or hinder your dreams from coming true.
The first thing you have to do after you’ve found the home of your dreams, is to fill out a mortgage application. This is really the first step in the mortgage process. Lenders will pull your credit report to analyze how much of a financial risk you are. You are given a FICO score which comes from the Fair Issac Corporation. FICO scores can range from 300-850. Any score under 620 is considered poor. Anything above 720 is considered excellent. You can get pretty much anything you want with a credit score over 720.
If your credit score is around 500, you can still qualify for a mortgage. Your payments will be much higher than if you had better credit. Some lenders even specialize in poor credit mortgages. You can also get the help of a mortgage broker. A mortgage broker can advise you about what options you have and what the best option is for you.
Even if you have great credit and are already in the home of your dreams, it is so important that you watch your credit report carefully. You need to check your credit with all three credit reporting agencies to make sure there is no fraud on your account. Also, watch out for any mistakes on your record. It will also help to make your payments on time. If you need to increase your credit score, try to minimize your debt-to-income ratio. Pay off any credit accounts that have a high balance. Avoid making any large purchases before applying for a mortgage as well. These ways will dramatically affect your mortgage application. Not only will you get the home you want, you’ll increase your credit score.