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Borrowers often ask me, “Can you get me a ‘zero down’ mortgage?” The answer is almost always ‘yes’, but with as many different ways to get there, their question really ought to be, “What are my mortgage choices for 100% financing?”
My favorite true “zero down” mortgage is the VA loan. I used it in 1986 to buy my first home. I had a steady income, but barely a dollar to my name. Two years later, I was transferred and sold the property for a sizeable profit…all with no down payment. Borrowers without VA privileges can get a “nothing down” deal with a willing seller. Sellers who own their home free and clear may offer worthy buyers a land contract which makes them the “bankers” for the buyers. These are rare, but valuable. Depending on the type of loan and the lender, buyers can often use gifted monies to cover closing costs and down payments to affect a “zero down” purchase. Another favorite of mine: Combine an FHA mortgage with one of many popular down payment assistance programs. With seller cooperation, borrowers can get very close to a no-cost deal, get an assumable loan with a great rate, and not get ‘beaten up’ with mortgage insurance. Borrowers with good credit scores can often get to 100% without gifts or seller assistance. In fact, with exceptional credit they can get such loans without even having to verify their income. Buyers seeking 100% financing-—especially those in the ‘jumbo loan’ category—-sometimes “piggy back” mortgages, putting one loan on top of another. This mortgage structure allows them to pay for the majority of their purchase with one loan at a better interest rate and terms, and the balance with a smaller, higher-rate loan. Need 100% financing, but have bruised credit? Even borrowers with credit scores slightly below 600 may qualify for 100% financing with some non-conforming lenders. Regardless of the means, if you have desire and patience you can usually find a “zero down” deal that suits your needs. A well-seasoned lender can get you started on your way. Timothy Phillips is a mortgage banker and newspaper columnist. Homebuyers should always consult a professional for guidance specific to their situation.
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