by
Jeanette Joy Fisher
A number of lenders offer various programs for
buyers to purchase homes without down payments. Part of the impetus for banks offering special
mortgage terms to low and moderate income buyers is the Community Reinvestment
Act, which requires lenders to provide a certain number of loans to those
buyers. However, since prices in many areas of the country average more than
$300,700, No Down loans can be more difficult to
locate.
Mortgage lenders offer many programs and options, both for investors and homebuyers. Countrywide,
America's leading independent lender, offers no down payment loans of up to
$422,300, providing 103% financing on homes to cover the closing
costs.
Wells Fargo makes similar loans through their No
Money Down Plus program. Wells Fargo offers an 80/20 loan package, in which they
will extend a mortgage for 80% of a home's purchase price along with 20% home
equity line of credit for the difference. Buyers have to pay a 1.1% fee for the
loan, but it helps them get into their homes without having to come up with tens
of thousands of dollars.
One option is an 80/10/10 loan, which allows buyers
to avoid purchasing private mortgage insurance (which can typically equal 20% of
the mortgage amount). Buyers are given a first mortgage, usually for 80% of the
home's value, and a second mortgage or home equity line of credit for 10%.
However, they must come up with a 10% down payment. (The Wells Fargo 80/20 loan
mentioned earlier increases the line of credit to 20%, and other lenders
sometimes increase the second mortgage by a similar percentage to eliminate the
need for a down payment. However, the buyer must have excellent credit, a good
job history, and limited liabilities.)
There are government loan programs that can help,
too, although they only include loans of less $300,700. For instance, Fannie Mae
offers a loan that only requires a 3% down payment (Flexible 97) and a Zero Down
loan (Flexible 100). Freddie Mac offers similar loans, called Alt 97 and Freddie
Mac 100. There are no income restrictions, but buyers need a FICO score of at
least 700.
Veterans can get loans from the Department of
Veterans Affairs that don't require a down payment, eliminate the need for
private mortgage insurance, and with lower interest rates. They can borrow up to
$240,000 to buy or build a home, but they'll have to pay a funding fee of up to
2.75%.
Talk to your mortgage broker or loan officer about your No Down loan program options.