No money but I want to buy a house...

By
Mortgage and Lending with The Mortgage Centre

The Best Way to Make Money Off Someone Else's Money! Here's HOW!

100% financing or "Zero down" mortgages are still POSSIBLE in Vancouver! 

CMHC may have cancelled "zero" down but a few lenders have found a way around this. Some banks or lenders will "give" you the 5% to put down of the purchase price, which is now allowing you to get 95% financing. This program is called "flex down" or "free downpayment mortgage" and here is how it works:

1. You pay the 5 year posted rate (currently 5.49% today) instead of a discounted rate (3.75%).

2. The cash is given to you at closing allowing you to put it as the 5% down payment.

3. You need to show cash assets of 1.5% of the purchase price of the home to prove you can afford to close on the transaction. This is because the bank is not going to pay the P.P.T., lawyer fees or municipal tax adjustments.

4. You will still need some sort of a deposit! This means that Realtors need to try to get the seller to accept as little a downpayment as you can handle. This may mean 5,000 on a 400,000 purchase. This 5000.00 would almost cover your 1.5% closing costs. BUT...will a seller accept this deposit. Typically Realtors and Sellers like a larger deposit (ie. 20,000 on a purchase price of 400K but you might be able to do this. If not...try to borrow a larger amount from a family member which shouldn't be impossible if the family or friend knows they will be getting it back at closing.) 

5. You will pay slightly higher CMHC fees. On a 35 year amortization, the typical CMHC premium is 3.15%, expect to pay 3.30% of the total amount to mortgage.  

Nothing in this world is truly free, as much as we like to think there is...there's not. The 5 year posted rate is 5.49% as of today, allows the bank recoups its 5% "free" money that it gave to you. You must pay it back by way of the higher rate over the 5 year term.  This is still a GREAT OPTION FOR HOME BUYERS. YOU get to live in the home while you save and build equity epitomizing the old saying of "The Best Way to Make Money is Off Someone Else's Money!" . But if you subtract the 5% that you got upfront from the extra interest paid...it works out to an interest rate alot less than the posted rate...so YES, it is a good deal for Buyers and it's a great option. 

You MUST have decent (VERY GOOD) credit. Your beacon score MUST be at least 680, sometimes 650 is tossed around but when it comes down to the nitty gritty, 680 is where you will need to be. This means holding off on that new car loan, vacation loan or applying for that Visa card till AFTER your deal is finalized. And you must have sufficient income to qualify for the mortgage payment at the higher rates based on your VERIFIABLE income. If you don't have verifiable income by way of a regular pay check....or if you are self-employed...you must declare on your income tax enough income to properly support the amount of money requested. There are no exceptions on this.    

THIS type of mortgage is perfect for someone with good credit but has found it hard to save the typical 5%. But on this mortgage....where that buyer may have qualified for 250K at a discounted rate...at the posted rate that amount would drop depending on the difference between the two rates. Slightly higher income earners are ideally suited for this product.

HAPPY House Hunting Vancouver!!

Ralna Burridge - Mortgage Broker Vancouver, BC

Comments (2)

Scott Leaf Personal Real Estate Corporation
Keller Williams Elite Realty, Port Coquitlam, BC - Port Coquitlam, BC
Scott Leaf & Associates Real Estate Team

I just went through this with a buyer who was given 'conditional approval' for a 5% with cashback, then wrote on a very modest condo well within his means but was denied, seems the credit score goalpost was moved back a few yards mid-transaction and he was just short.

Jan 27, 2010 10:44 AM
Ralna Burridge
The Mortgage Centre - Vancouver, BC

Scott: Hmmmm...a credit report is good for 90 days...and credit scores don't waiver much from month to month...if he was that close to the edge where a short span resulted in a decline...which bank did he go to? Was it CMHC declined or just the bank or both?

Jan 27, 2010 12:53 PM