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100% Financing has disappeared! Or has it?

It seems like every time I turn around on the Internet, I come across another article on the demise of zero down home financing and the impact it will have on the Real Estate industry and First Time Homebuyers.

Shocking news These articles run the gamut from shocking to discouraging. Many of the articles blame this situation on the sub prime lending practices in recent years. Many of the articles predict that First Time Homebuyers will no longer be able to attain the American Dream! Many say that 100% financing is gone for good. I say: Don't believe everything you hear (or read). Zero Down Home Loans are alive and well.

This article is not about the current subprime situation. Subprime situations are a significant portion of the overall mortgage market, but they are nowhere close to being in the majority. The majority of the mortgages that get approved, each and every day in America, are the garden variety, middle-class, blue-collar type of transactions that we share with our neighbors, co-workers, friends and families. This segment of the mortgage market has had access to 100% financing for years and still does today.

Probably the best-known zero down home loan is the VA Loan for Veterans. 100% financing has been available to Veterans for a long time. There is no news that this will change. VA mortgages will actually allow a Veteran to finance not only the price of the home, but the cost of purchasing it (closing costs) as well!

If you are not a Veteran, you still have access to zero down financing. Fannie Mae (FNMA) and Freddie Mac have been supporting 100% financing for home buyers for years. Here are just a few loan programs that your loan officer has access to:

Freddie Mac Programs

Home Possible® 100
Home Possible Neighborhood Solutions® 100
Affordable Merit Rate Mortgage
Guaranteed (Section 502) Rural Housing (GRH) (this program allows 102% financing)

Fannie Mae Programs

This is far from a comprehensive listing of available 100% loan programs. Many lenders have their own programs in addition to those offered by the government.

Just remember the next time your read an article or hear a radio ad about the demise of 100% financing in the mortgage industry; "You can't believe everything you hear!" Good news just doesn't sell as many newspapers as bad news.

Posted by Mark Flanders on 03/31/2007 09:53 PM

Comments (13)

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13 Comments on 100% Financing has disappeared! Or has it?

MAR

2007

Wow. A voice of reason. Well said and it is nice to know that the "sky is not falling."

Randal, the hype just drives me nuts. Gets my clients all in a tizzy. It's just ridiculous.

Randal-These are great thoughts about mortgage issues because the talk of the town over the past few weeks has been how bad everything in the mortgage industry currently is. However, I must disagree with your statement about VA loans as far as closing costs are concerned. The veteran is able to finance the "VA Funding Fee" as part of their loan but the closing costs and pre-paids must be done separately and cannot be rolled up into the loan. What I have been doing here in Hawaii is due to our current buyers market is to get the sellers to credit the buyers enough for closing costs. In that case, they are able to move in for zero out of pocket expenses (my goal!).

There has been an instance or two where the price of the property was so undervalued that my buyers had to offer X amount above the purchase price in order to get the credit back for closing costs. I never give up and I will work every possible angle to get them into a home legally.

Aloha!

APR

2007

I have had several VA loans come in with less than a $1000 out of pocket in even the hottest market.

One of the problems I run into with the over price offers and the credit backs is that many times the homes won't appraise. I do not under price my listings, so when I see those offers, I usually push to get something from the buyer, that they will make up the difference between the appraisal and the sell price.

David (or Tonya) - I'm afraid you are mistaken. Over 90% of the VA loans I have closed have been structured exactly the way I described. VA allows it and it works like a dream. You may need to work with a more experienced loan officer.

Closing costs are not rolled directly into the loan. They are rolled into the price and therefore end up in the loan.

Randal-I think you just said the same thing that I did. I am sure that this would have been more clear had we been in a face to face conversation as email is sometimes difficult to get the entire point across.

My point was that the VA will not allow you to say "My buyer is going to finance the closing costs as part of his/her loan" which is clearly not in accordance with VA Pam 26-7. By adding the amount of closing costs into the purchase price, the closing costs in essence do get rolled up into the loan which is how I have been negotiating for my VA buyers to get into properties.

Aloha!

You guys can interpret it the way you want....bottom line....it's just the way you guys are "saying" it....

I have my own opinion....you have a purchase price and everything but the non-allowables can be financed on top of the loan purchase price. For the non allowables I have worked with a few "seasoned" loan officers who will "eat" those costs for the buyer so the seller will not have to pay.

Did I word it better?

For more info and in depth definition click here:

What VA does for the Homebuying Veteran

Oops...not EVERYTHING.....non allowable and prepaids....sorry.

The loan officers that I have been working with on VA have been picking up the non-allowables. When the market was hot I had to sell VA to the sellers, it is a lot easier now with some more inventory.

The media does a great job in spreading bad news. Yes 100 % financing is alive and well, at my branch 65% of loans submitted are 80/20 purchases.

Eddy

Okay, everyone agrees. A VA buyer needs no cash! :) PS- My name is Mark not Randal :)

Hey Mark....yup...100%s still flourishing here in Hawaii....VA or not.

Who cares who's 100% right in the way they say things....right?

Mark-Cool, a face to go along with the name! Sorry about the Randal earlier as I glanced at the name in the comment above my first one.

I only believe in operating at 100% as there is no room for error in this business.....not when people are making the biggest purchase of their lives. Good luck in all your future VA loans! Aloha Mark!

If you are going to claim giving 120% to your clients then you should not be satisfied with less than 100% being right. There is no room for "good enough" in this business.

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