"No money down" may have sounded like magic words to home buyers, but according to Jim Pair, president-elect of the National Association of Mortgage Brokers, the magic of 100% financing is gone. "What we're doing now is what we did 10, 15, 20 years ago as far as lending is concerned."
Some have argued, even here on Active Rain, that it's still possible to get 100% financing. A more likely scenario for all but a very few is that the lender will require:
- 3% (soon to be 3.5%) for buyers who can qualify for FHA, which means they have a credit score of over 580.
- 5-10% for buyers with credit scores over 720 (sometime lower if a buyer has additional assets), in need of less than $417,000, and not residing in a "distressed area" with high foreclosure rates and huge price drops
- 10-15% for buyers with credit scores over 720 (sometime lower if buyer has additional assets), in needs of more than $417,000, and needing less than $417,000 but residing in a "distressed areas" with high foreclosure rats and huge price drops
- 15-20% for buyers who need substantially more than $417,000, have credit scores below 720 with no assets, or living in a distressed area
- 20% or more for buyers who need $729,00 or more, have credit scores below 680 and no significant assets, and who want to buy in one of worst distressed areas
No down payment may be a great idea for wealthy buyers who don't want extra cash tied up in housing; up until recently, such deals were available to nearly everybody. Many took the deal because they had little or no money to put down or bought an expensive house in anticipation that they could make the monthly payment.
No down payment loans are viewed as one factor that has made the mortgage crisis worse. No down payment means no equity, so when home values declined, such buyers found themselves with property worth less than what they owed on it. When payments on ARMs escalated, the buyers usually did not have the funds to make the higher payments.
There may still be programs out there that helper lower income buyers put together a down payment, but the private loans available for down payment assistance are no longer available.
For information on beautiful homes in Clark County, including bank owned properties available at great prices, contact your Prudential Americana Group Realtor® Yonas Woldu at (702) 236-8997 or visit www.VegasRealProperty.com.
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Yonas, please read my blog! There is 100% financing available in the form of USDA Rural Housing loans, FHA loans with gifts of down payment, FHA loans with LOANS for the down payment, and VA loans. These are all government loans and not just for low income buyers. They do not have community seconds on them, although they can stack a community second on any of these programs to have a lower payment in the form of down payment and to cover the closing costs.
As far as 100% loans being one factor that made the mortgage crisis worse, I don't agree. If you had 100% stated and no doc loans, yes, but these loans are ones that a client has to qualify for. They are fully verified loans with maximum debt to income ratios. Someone with 20% down can have a debt to income ratio fo 55% and be approved but someone with no money down has to have a debt to income ratio of 41%. Which one stands a better chance of "affording their payment"?
What caused the mortgage crisis was the non-performing loans causing margin calls to the investors and most of these, as can be evidenced from what loans have "dried up", were in the subprime arena, stated income, no doc, second home, investment property and condo market. Here in Florida, Suntrust and Chase won't even do a loan AT ALL on a condo as they are the lowest performing loans they have. At one point, we had an investor send us a flyer that said, "No Job, No Problem". This was for 100% completely no doc loan and you could get it on an investment property up to $1.25 million with a 650 credit score! (This was offered by Bear Stearns - anybody notice a correlation here??!!)
On my blog, I even have an entry about the foreclosure rate on USDA loans, which really is a no money down loan as you can also finance in the closing costs. Between here and Tallahassee, which is 3 hours away, there is ONE foreclosure. We have been offering this loan for 10 years and have done a lot of them but there is only one foreclosure. I have also done a ton of 80% condos here in the Panhandle of Florida and I can assure you that a whole lot more of them are in foreclosure or delinquency status that the 100% USDA Rural housing clients!
I see that you are in Las Vegas, which is Clark County, Nevada. Below is a map of those areas that allow the USDA program in that county (the orange area isn't allowed; the yellow is).
If you have never worked with this program, I would suggest that you contact someone in your area and discuss it. It truly is a great program! Check out my blog for more information - I am a National Trainer for the USDA Rural Housing mortgage!
