If the phrase “no deposit home loans” sounds a little bit too good to be true, that’s because it is.
Before the economic recession of 2008 — and the great financial housing crisis that went with it — first-time home buyers could often find financial institutions willing to offer them types of home loans that required no down payment. Unfortunately, that simply doesn’t happen anymore.
However, there are still a few ways to find mortgage rates that are very much like no deposit home loans. If you’re shopping around for a new home, you’ll want to take the time to compare mortgages, too. Once you feel comfortable with the numbers, be sure to lock in the rate as soon as you can.
Here are a few options to consider when you don’t have a lot of money available up front for a down payment:
- Lender’s Mortgage Insurance: Sometimes you can still find local mortgage lenders willing to let you borrow up to 95 or 97% of the home costs. But in return, you’ll be expected to take out a lender’s mortgage insurance, or LMI. These can be costly, and don’t protect you from default. In this situation, the financial institution will want to see that you have stable employment; switching jobs while going through the mortgage process is a sure way to cause delays.
- Guarantor Loan: If you are lucky enough to have a good relationship with your parents — and they’re in good financial standing — you may consider talking with them about serving as a guarantor on your loan. This means that they will be held responsible if anything should compromise your ability to make payments. With this method, home mortgage lenders are often willing to lend 105% of the costs.
No deposit home loans might sound like a fairy tale, but there are ways to get nearly zero down home loans with the right financial planning. In any case, you’ll still want to have a good job and a good credit score, as you’ll need a score of 680 or 620 for Federal Housing Administration loans.
You can still buy your dream house without a huge down payment! Don’t wait to start shopping for mortgages today.