The 100% Loan

This is least complicated loans because it only requires one lender to write one loan for 100% of home’s selling price.

The interest rates can be significantly higher than with 80/20 loan plus you will have to pay PMI until you have built up 20% equity in your home.

VA Loan

If you are an honorably discharged veteran of United States Armed Forces then a VA (Veteran’s Administration) loan offers 100% financing without incurring penalty of having to pay PMI.

Lenders who participate in VA loan programs have less stringent qualification requirements because U.S. Government is guaranteeing borrower’s performance. This means that borrowers who might not otherwise qualify for a mortgage can get qualified with a VA loan.

Other No Money Down Alternatives

There are other government loan programs which can get you into a home with no down payment if you qualify for terms and conditions. For example, if you are buying a home in a rural area then you may qualify for a USDA Rural Housing loan program.

The American Dream Down Payment Initiative law was recently signed by President Bush and it offers another avenue into home ownership. There are some qualification requirements including that you be a first-time home buyer who is purchasing single-family housing that you intend to live in. The term “single-family” includes conventional one-family housing, a condominium or co-op, as well as a pre-manufactured or mobile home.

Even though law says that you have to be a “first time home buyer”, actual definition states that a first-time home buyer can be a person or married couple who have not owned their own home during three years prior to applying for a loan through program.

The Federal Housing Administration (FHA) offers low income first time home buyers chance for home ownership with just a 3% down payment. They have resources available to steer borrower towards other Government “down payment assistance programs” which can end up resulting in a zero money down loan in end.

HUD is in process of getting a true “Zero Down” program launched and it is expected to become available during 2005 if Congress passes legal changes required to make it law. Not only does HUD want to offer Zero Down loans, but they want to allow borrower to roll some of closing costs into loan up to a maximum loan value of 103% of selling price.

Many State and local/county governments also offer first-time home buyers and other targeted groups opportunity to participate in programs which offer no money down loans.

Your best bet for finding any zero down programs is to do some research yourself and enlist aid of a mortgage broker who specializes in zero money down mortgage programs.

How your FICO score is calculated.

10% is determined by number of open credit accounts that you have and mix of types (revolving, installment, and mortgage).

35% is derived by measuring your repayment history and looking at adverse credit items such as foreclosures, judgments, bankruptcies and negative public records including tax liens and wage garnishments.

30% is based upon a formula that includes your balance due across all open loans, types of loans and number of loan or credit card accounts that have an open balance.

15% is based upon length of you credit history or how long you have had a credit history on file.

10% is based upon amount of new credit in your account including how long it has been since you opened a new account, how long since your last new credit inquiry and how good your most recent credit history is.

Here’s how to improve your score:

1. Get a copy of your credit report and review it for errors. Use credit bureaus error reporting and correction system to address any serious errors.

2. Pay all of your bills according to payment schedule that you agreed to.

3. Avoid opening a lot of new accounts in a short period of time and especially avoid opening any new accounts before applying for a mortgage.

4. Don't apply for credit cards that you have no intention of using, and close any accounts that have zero balances and that you do not intent to use again.

5. Keep your credit balance low in ratio to your overall available credit.

6. Pay off credit card bills instead of transferring them to lower interest cards and closing previous account. It could actually hurt your score by disturbing ratio of open debt to number of cards.

7. Monitor your FICO score by getting a new copy of your report every six months. Once your score moves into an acceptable range then either refinance your existing mortgage, if interest rates warrant, or apply for a mortgage if you have been turned down in past.

Additional ways to improve your chances of getting approved.

While your FICO score is key determining factor in getting approved for a home mortgage, there are some other factors which affect approval process.

Show good prospects for continued employment

If your job prospects are a bit hazy then a lender may choose not to fund your mortgage even though you have high scores. Try not to change jobs within 6 months of applying for a mortgage if you can possibly help it.

Have a large down payment

Although some mortgage lenders advertise low or no down payment programs, they are exception to rule. Most lenders want to see 20% down. If you have less, then you may get passed over or, at very least, be required to pay expensive PMI (Personal Mortgage Insurance) each month until you do have 20% equity in your home.

Stay in a realistic price range

Don’t try to buy more house than you can comfortably afford. A lender is inclined to say “no” if he sees that too much of your income is going to be taken up by your mortgage payment.

Be Honest

Don’t try to hide any “bad news” including a pending job layoff, strike, etc. If you lie to your lender you probably will get caught.

Now that you know all about mortgage approval process, are you ready to buy a new home? It can look like a complicated process, but you can do it if you have your financial affairs in order.