Today, there are not a whole lot of financing options for homeowners with a small amount of equity in their properties. The mortgage and banking crisis has made many lenders tighten their loan guidelines requiring borrowers to have excellent credit and a sufficient amount of value in their homes to cover the risks of extending you a mortgage in this volatile economy.
A few lenders now require a minimum 90% loan to value (LTV) for the best of borrowers and many others offer mortgage products at 80% LTV. So, if you do not have 10-20% equity, then it will be extremely tough to obtain financing. However, there are limited options for some of you out there. This article will go over these options.
In order to refinance a home with little to no equity, someone would have to go through the proper channels. In this case, federally insured mortgages may be one of the is the only options for home loans to people with only 5% equity and even no equity at all. The Federal Housing Administration or FHA is a key player in offering these loans, as is the US Department of Veterans Affairs or VA.
The maximum of a Federal Housing Administration loan is based upon the average value of the homes in the area. The down payment amount in the terms and conditions of the loan is the awesome part. Only 3-5%! This is a fantastic deal for people who have little to no equity. There are some income requirements and credit scores have to be fairly good. The prospected borrower’s debt to income ratio must be relatively light as well, as to give the FHA the best chance at successfully getting paid back for the loan.
In order to qualify for the VA loan you must have past experience in the military.
In order to see if you qualify for this type of mortgage, you will need to seek an FHA or VA approved lender. Not all mortgage companies are approved to offer these types of loans. You will want to deal with an experienced lender or loan officer who specializes in these mortgages because they can be very difficult to complete with the strict requirements. You do not want to deal with someone who moonlights or is not approved. An unseasoned loan officer or lender may hurt your chances of obtaining financing by making a mistake on your mortgage application causing you to get denied or cause serious delays. You do not want this to happen to you.
If you cannot get approved for any mortgage, then you may want to apply for a loan modification with your current lender. A loan modification is when your lender modifies your existing mortgage by lowering your interest rate so you can afford your monthly payments. This will cost you no money and it is not a new mortgage.
If you want to find out more about loan modification, then you may want to join our online forum. Here on LoanSafe.org we have America’s #1 mortgage forum with over 30,000 people sharing loan information with one another. You may want to join the community if you have any more questions or would like to share your mortgage experience.