Buying a House With No Money At All! 100% Financing Options Made Simple

“NO MONEY DOWN!” “100% FINANCING!” “103% FINANCING”

Buyers love seeing and hearing those words. And why wouldn’t they? First-time buyers make up 40 percent of the home buying market. This is nearly half of all homes sold.

Consider this. There were just over seven million homes sold in 2005, not including new construction homes. This means that nearly THREE MILLION buyers bought their first home last year.

Marketing to this segment, if you are a real estate agent, is an absolute must! Of these first-time homebuyers more than four out of every 10 bought this home with no money down.

On average, first-time homebuyers put down less than 2%. Around 10 years ago, the average first-time homebuyer put down a little more than 10%.

I would say that nearly seven out of every 10 loans I do has 100% financing and it’s not just first-time homebuyers. However, most potential first-time buyers don’t even realize this option is available to them and that’s why this newsletter will focus on them.

The real estate market flourished over the last few years in large part to 100% financing for first-time homebuyers. Suddenly, buying a home is possible for nearly everyone. More first-time buyers have been able to enter the marketplace than ever before. Banks have become more liberal and lending standards have loosened. There are many, many ways to get 100% financing.

You can get 100% conventional financing with credit scores as low as 620 and a fairly recent bankruptcy.

You may be able to get a government loan with an even lower credit score. 100% financing is available for nearly every borrower. You can even buy a $2,000,000 home with no money down today. That’s two MILLION, not a typo at $200,000. Amazing, but true.

Many potential first-time homebuyers never think of buying a house because they don’t believe they have enough money for the down payment.

They’ve been told through the years that they need a 10-20% down payment to buy a home. Obviously, this simply isn’t true.

Let’s look at most of the 100% financing options:

1) 100% No Down Payment Programs.

These programs require the buyer to pay ordinary closing costs. These programs come in all varieties from 2, 3, 5, 7, and 10 year adjustable rate mortgages to 30 year fixed mortgages. All are usually available as interest-only too.

PROGRAM HIGHLIGHTS AND HOW DO I QUALIFY FOR THIS?

o 2.5%-3.5% of the total loan amount in cash required to pay closing costs and two month’s of your new loan payment in the bank for reserves.

o Stated income, stated assets and even No Doc is an option with decent credit.

o Plan on having a mid credit score of at least 660 if you cannot fully disclose your income to qualify.

o If you can fully disclose your income to qualify, your mid credit score can sometimes be as low as 580.

o These loans are designed for people who have some money for closing costs. You can qualify for this with credit scores as low as 580.

This is the most popular 100% financing option on my team.

2) 100% No Down Payment and Seller Pays Your Closing Costs.

The exact same loan program as #1, with all of the same loan program options above, but with a different twist. The seller pays all of the 2.5%-3.5% in closing costs. This is the way to go if your buyer has no money at all but fairly decent credit.

PROGRAM HIGHLIGHTS AND HOW DO I QUALIFY FOR THIS?

o The seller pays the 2.5%-3.5% of the total loan amount to pay closing costs.

o You are still usually required to show two month’s of your new loan payment in the bank for reserves.

o Stated income, stated assets and even No Doc is an option with decent credit.

o Plan on having a mid-score of at least 660 if you cannot go fully disclose your income to qualify.

o 580 mid credit score is usually the minimum required on full doc loans but plan on a much higher interest rate.

o These loans are designed for people who have no money for closing costs.

Nearly every loan program out there today allows for the seller to pay your closing costs. This means no money out of your pocket.

If you don’t have the necessary reserves or you don’t have the ability to get them, it is not a big deal, and you should still be able to get the loan. However, it’s important to notify your preferred lender of this immediately as this could change the availability of the loan program and likely your interest rate.

3) 103% Loan With No Down Payment, Little or No Closing Costs.

Maybe your seller refuses to pay for closing costs and your buyer has no money to close. Then 103% loan programs may be the way to go. This means the lender finances the closing costs as well. The requirements on this program are stricter and the options fewer.

PROGRAM HIGHLIGHTS AND HOW DO I QUALIFY FOR THIS?

o The lender pays the 2.5%-3.5% of the total loan amount to pay closing costs and ties this into your loan.

o You still may be required to show two month’s of your new loan payment in the bank for reserves.

o Stated income, stated assets and even No Doc is NOT usually an option regardless of your credit.

o Plan on having a mid-score of at least 620.

o These loans are designed for people who have no money for closing costs and the seller refuses to chip in.

The interest rates on these programs are higher and the program selection is more limited. If possible, it’s a better move to go for #1 or #2.

4) VA Loans

If you are a Veteran, VA loans require no money down and the seller can pay your closing costs. The rates are very good and the credit requirements are not very high.

PROGRAM HIGHLIGHTS AND HOW DO I QUALIFY FOR THIS?

o Must be a veteran in active duty, or honorably discharged.

o The seller usually pays the 2.5%-3.5% of the total loan amount to pay closing costs but the Veteran can pay too.

o Must fully disclose your income to qualify. You cannot go stated income or No Doc.

o You will not be required to show two month’s of your new loan payment in the bank for reserves.

o Stated income, stated assets and even No Doc is NOT an option regardless of your credit.

o Plan on having mid-score of at least 560 – 580 although there is no formal guideline on this.

o These loans are designed for Veterans only.

5) FHA Loans

This isn’t really a “No Money Down” option, however many first-time homebuyers have found that the FHA loan is one of the best alternatives when they don’t have much money to put down.

With an FHA loan, you could put down as little as 3%. FHA loans are easier to qualify for. If your credit is less-than-perfect, the rates on an FHA loan are usually far better than the sub-prime alternative that you may be facing. For example, if you have a 580 mid-credit score, your options may be FHA or a sub-prime loan. FHA would probably be cheaper for you.

Now, 3% may seem like a lot to come up with, but many people find that when they put their minds to it, it’s not that difficult. FHA allows this 3% to be gifted to you by a family member, employer, or even a charitable organization.

FHA loans do have very strict requirements and restrictions. Not all town homes an

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