I am actually in the approval process right now. Most mortgage companies are into shady business practices. If you buy a new home (new construction), it is really easy in most cases to be approved. You can do a true no-doc loan in which you dont have to prove income or employment. The downside is a higher interest rate of course. Or, if you have someone you know that is self employed, etc, you can probably convince the company to do a stated income mortgage in which you can verify employment ( 😉 😉 ) but not income. Verification of employment involves your "employer" writing a letter saying you have worked for them for two years. It really is like a one sentence letter. The interest rate is slightly lower in this situation. Moreover, if you can prove assets (usually means you can show 2 months mortgage in your bank account) then your interest rate is even lower. Rule of thumb, the more you show the lower the rate. Furthermore, there are programs out there in which you can do 100% financing with a no-doc or stated loan. In other words, no down payment. However, you usually have to pay closing costs, unless, you use a new home builder that will cover your closing costs with incentives, etc.
The advantages to 100% financing (aka 80/20 mortgage)? NO PMI. The only real other way to avoid PMI is by putting 20% down. If there are other ways perhaps someone else will share them.
I would also consider doing an ARM unless you plan on living in the house for 7 or more years. An arm gives you a fixed (lower) rate for the first 2,3,5,7,10 years etc. After that, the rate flows with the market. The shorter the ARM the lower the initial rate. This method won't build equity as quick as a conventional loan, but the fact is that you aren't going to build much equity in the first 7 years anyway. The most important thing is that ARMs will lower your mortgage considerably in most cases. You can also consider doing an interest only loan which can drastically lower your payments. If you go this route, the return on the house is its appreciation in market value. You actually won't be paying any principle on the mortgage (interest only), but if your house appreciates enough you will build some equity.
Last piece of advice: Keep it in perspective. You probably arent buying a house to get rich. At minimum you want to recoup most if not all or more of the money you would otherwise be sinking into rent. In other words, even if the market hits the fan and you don't break even on the home, that doesn't mean you necessarily lost money. Example: You buy a home for 100k, you sell it for 97k. Are you 3k in the hole? Yes. Did you still come out better than paying rent for 4 years? YES. Four years of rent at $800 a month is 38,400. So you paid 3k in exchange for 38k. Not a bad deal. I realize that a large portion of your mortgage goes towards interest, but the point is still the same: you are going to get at least a portion of your "rent" money back. However, the good news is that your odds are slim at losing money even on an interest only loan. Hope this helps.
