First Security Buying a home with little to no money down

Buying a home with little to no money down has been very common over the past 5+ years. Lenders made it extremely easy to borrow money to buy a home without the need to have any down payment, or very little down payment. However, since the beginning of 2007, buying a home with little to no money down has become more and more difficult as lenders are tightening lending guidelines and lending less on mortgage loans that have little to no money down.

Whether you are a first time homebuyer or you are a seasoned homeowner looking to upgrade and buy a new home there are mortgage programs available for you. There are 100%, no money down mortgage programs that are available for many people. There are even some 100% financing (0 money down) home loan programs available for people with credit scores as low as 500. While the financing terms will not be the most favorable it is still nice to know that you may have options for your situation.

100% Sub-prime Loan
This type of financing is generally for people with a blemish or a few blemishes on their credit. It can also be used for people who may have a hard time documenting income or who seek "creative financing" methods. Usually, the 100% sub-prime loan will be 1 loan instead of 2 loans such as the 80/20 combo loan. There is generally no PMI on this type of loan either, however your interest rate is generally going to be at least 1-2 percent higher than your rate would be with an 80/20 combo loan. Sometimes with the right situation you can even make this type of financing work better for you than other methods. Sup-prime loans generally will cost you a little bit more than conforming loans but they are generally worth it, if your situation calls for one. Sometimes these 100% sub-prime loans will even offer 103-107% financing as well. What this means is that your home loan financing would be a true no money down, no money out of pocket financing. If you ever decide to consider this option look at the both the "big picture" and the "small picture". Dont accept a 9% rate so that you dont have to come out with any money out of your pocket if you can qualify for an 8% rate and all you have to do is come up with the closing cost money. A good mortgage LO should be able to help you decide which loan is right for you.

80/20 Combo Loan
Probably the most common way to buy a home for people with little to no money available for a down payment is the 80/20 combo loan. This is 100% home financing utilizing an 80% first mortgage loan and a 20% second mortgage loan. For example lets say you have put in a bid on a home for $150,000 and it was accepted. This means $150,000 is your purchase price and if you were doing an 80/20 combo loan you would obtain an 80% first mortgage in the amount of $120,000 (150,000 x 80%) and you would obtain a 20% second mortgage in the amount of $30,000 (150,000 x 20%). The main benefits of the 80/20 combo loan are that you are able to buy a home with little to no money down and you are able to avoid PMI, Private Mortgage Insurance. PMI is a very costly insurance, especially when you have a very small down payment, that you the borrower pays to help protect the bank in case you default on the mortgage. Not only is the insurance costly but PMI requires you to pay insurance for the bank. I dont know about you but I would not like being required to pay for someone elses insurance. Therefore, this is one of the hottest and most common financing methods available today to buy a home with zero money down.

Seller Carryback
A seller carryback, also known as a seller piggyback or a seller second mortgage, is a loan where the seller actually holds title to the second mortgage of the home. Sometimes you may have certain circumstances that are preventing you from qualifying for the financing that you need and your mortgage lender will not allow you to finance over a certain percentage of the purchase price with them. However, they may consider allowing you to obtain a second mortgage from the seller (if the seller is willing and able) so that you can still buy the home under the financing terms that you need. For example lets say you were looking to buy a $100,000 home and the lender would only allow you to borrow 90% ($90,000) of the purchase price with them for the mortgage financing. This means that you would need to come up with 10% ($10,000) in order to buy this house. However, if the lender and the seller will permit you to use a seller carryback mortgage you may still be able to buy the home with little to no money down. A seller carryback is going to be similar to any other mortgage. It will be drawn up as a mortgage with certain provisions to it. You may be required to make monthly payments based on a certain interest rate for a certain amount of time or you may be required to pay off the seller carryback mortgage within a certain time frame and not be required to make any monthly payments. The seller of the home would obviously need at least that much equity available in the home to make that type of financing work as well. The seller carryback will usually help you to avoid PMI, or at least limit it, buy a home with little to no money down and provide you with another financing alternative when you are buying a home.

There are many other programs available out there as well to help you buy a home with littel to no money down but I wanted to touch on some of the most common types of 100% finanicng for informational purposes. Please feel free to email me or to post your comments if you have any questions about buying a home with little to no money down. There are many programs available out there that many mortgage companies and its Loan Officers do not take their time or put in the effort to find. It is imperative that you find a qualified and educated mortgage professional to deal with.

100% Financing - Today’s lending market is far more lenient with home loan financing than in times past. The ability to borrower up to 100% of the homes value would have been un-thought of 20 years ago.

The nice thing about 100% financing is your interest deduction is much higher than a regular conventional loan.

If possible, it is recommended to split the 100% financing into 80/20 to avoid PMI on the mortgage. The borrower should be aware that the PMI you pay every month is not tax deductible.

The 80/20 combo is the most popular 100% loan available although there are a few lenders who are giving better pricing with the 70/30 and 75/25 combos.

Usually people will go with 100% refinancing in order to be able to take as uch cash out that is needed. There is also 80/20 programs that may have lower rates

100% financing can be obtained by financing one loan at 100% of the value of the home or by dividing the loan up into two mortgages and financing an 80% 1st mortgage and a 20% 2nd mortgage, which is called an 80/20. An 80/20 is becoming a very popular financing option for people looking to avoid mortgage insurance.

When you are purchasing a home with 100% financing it is an option to get the home sellers to pay your closing costs. This can make owning a new home a very low cost process.

When you are purchasing a home with 100% financing it is an option to get the home sellers to pay your closing costs. This can make owning a new home a very low cost process. Make sure your realtor knows that you want seller paid closing costs when you write your offer to purchase.

There are even programs that will allow you to finance up to 103% of the purchase price of the new home, the additional 3% is used to help pay for closing costs.

In addition to the 100% programs for your primary residence there are now programs that will allow you to purchase a non owner occupied or investment property to 100%.

There are certain qualifications to get 100% financing that your mortgage broker can help you figure out. They are very lenient and there are tons of programs available. If you're even considering purchasing a home, contact your broker now dave@gofirstsecurity.com.

If you are looking for 100% financing but do not qualify for it, there are down payment assistance programs available that can help you purchase your new home. Ask your mortgage professional in N. Olmsted, about such programs that may be available to you. These programs are available to people in every credit situation, and are a great tool to get you in your dream home.

For example: FHA requires that you put 3% down to qualify for an FHA mortgage. The grant programs will give you the 3%, as long as the sellers agree to it, and it is written in the offer to purchase. The money does not get paid back from your funds ever, thus achieving 100% financing. for you. This is just one example of how a down payment assistance program can work for you.

Since real estate values have increased at a much faster pace in recent years, many home buyers find it difficult to save for a down payment. As a result, 100% financing has become ever more popular. Although more banks are offering an array of 100% financing loan products, home buyers should be realistic and expect to pay higher interest rates on these types of "No Money Down" mortgages.

If you have any questions regarding our products, you can contact us by calling or e-mailing us and we'll get back to you as soon as possible. Thanks!

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Information listed above is to be used for educational purposes only and is not guaranteed