So, we have a 100% financing program back!!! It’s legitimate, it’s helpful, and it’s back.
Since the government decided to “kill” even further the real estate business with the cancellation of Nehemiah program, we thought that a big portion of folks won’t be able to afford homes any longer. Some may argue that if people can’t afford even 3% down payment (the requirement for FHA loans) and require assistance on paying the closing costs as well, then they shouldn’t be buying a home to begin with as they obviously can’t afford it!
Well, I think it’s just leveraging available cash: the less cash you put towards the purchase, the more you have left for renovating the place or acquiring more properties. It works simply as any other FHA program would. This 100% program allows you to borrow additional money to cover your down payment and /or closing costs at 2% higher rate than your APR up to $10,000 max.
Let’s look at the example: Say, you want to buy a property for $165,000.
Down payment of 3% required : $4,950 (although the new law states that the down payment should be at least 3.5%, some lenders are still lending with 3% down payment only)
Closing costs: $4,950 Inspection and appraisal: $350 + $250 = $600 (usually appraisal is reimbursed by seller, at this example we’ll assume it’s not)
Total cash required: $10,500 needed to purchase - Down payment and closing costs assistance of up to $9,900 = $600
Financing: $165,000 – $4,950 down payment = $160,050; this is the amount that needs to be financed under standard FHA program.The other $9,900 (for down payment and/or closing costs) will be financed for 10 years only and at a rate 2% higher than your APR.
****Let’s assume the APR rate is 6.5%, annual property taxes are $2,200 (I know it seems high, but currently it’s one of the problems with properties in LV – the prices have fallen, but the property taxes were assessed based on previous values of the properties which were higher; eventually, the property taxes should come down significantly or you can appeal to have your property taxes reassessed), the loan term is 30 years fixed.
Your payments for loans would be: $1,012 (for 1st loan) + $124 (2nd loan) = $1,136
Plus property taxes of $183, your monthly payment is $1,319. We should also add HOA fee to this equation, however, the HOA fees vary greatly. Let’s assume the HOA in this case is $20.
THE TOTAL PAYMENT IS: $1,339
This is not bad, as the rent for $165,000 home would be about $1,500/m.
This program allows you to have little or no cash upfront. If you’d like more information on this program, let me know!
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