MAY 31ST, 2023

100% Finance Home Purchase

One of the newest developments in the mortgage industry is the ability to purchase a home with no down payment. That development eliminates what was one of the major challenges to owning a home – trying to come up with sufficient cash for a down payment. Research has shown that 40 percent of first-time buyers purchased their new home with 100% Financing last year. These no-down-payment programs are targeted to consumers with good credit but not much cash. While most consumers may know there are 100% Finance Home Purchase mortgage programs available, they may not be aware there are dozens of them available.

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About 100% Finance Home Purchases

80/20 – Is It a Good Option for this Type of Program and What Is It Exactly?

• An 80/20 mortgage loan is a “combination” loan for 100% Financing and no down payment. This mortgage type will provide a consumer with two loans: 1) one for 80% of the purchase price, and 2) 20% of the purchase price.

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• 80/20 Option (100% Financing) and No Down Payment. A major advantage of this loan, aka 100% Financing, is the ability to purchase a home with almost no money down. If a consumer has a strong credit record but have limited funds to commit to a down payment, then the 80/20 Mortgage Option is perfect. Generally, lenders require a down payment minimum of 20% of the purchase price. And, if the loan amount is over 80% of the purchase price, Private Mortgage Insurance (PMI) is usually required. A consumer can avoid paying PMI by obtaining a Second Mortgage (piggyback loan) to back up their first mortgage. The first mortgage is provided for 80% of the cost of the home and then the piggyback-Second Mortgage is for the remaining 20%. The 80% first mortgage can be fixed-rate (15 or 30 year), adjustable-rate (typically 5/1, 7/1, or 10/1 fixed period ARM) or interest only. The 20% Second Mortgage can be a Home Equity Line of Credit that will change along with the Prime Rate. COMBINED, the two loans allow a consumer to finance 100% of their home with no money down.

There is a new loan offered by Freddie Mac via various lenders/brokers whereby Freddie Mac is offering a 100% Mortgage Program to consumers who have a credit score as low as 620.

Other 100% Mortgage Programs Require a Much Higher Credit Score.

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