Zero Down Payment Mortgage
It's true, this government guaranteed mortgage loan requires no down
payment. It also allows for maximum seller concessions, and the 3.5% funding
fee may also be finance. (max: 103.5% LTV)
The funding fee in 2012
is only 2% so max LTV would be 102%. Just keep in mind that the
Government changes their fee percentages at a drop of the hat. They
usually come out with an AN that announces the change to lenders a few
months in advance but that information seldom gets out to the consumer. This 100% mortgage is based on the APPRAISED value.
The appraised value thing is a big deal. Other mortgage programs say the
loan to value is based on the appraised value or the purchase price, which
ever is lower. The loan being based on the appraised value is a
distinct advantage to both the seller and the buyer.
This is a big advantage to the seller
because he can negotiate options like paying sellers closing costs or
paying for any repairs that are needed. This will help find
qualified buyers that are just short of cash.
It's an advantage to the buyer because the seller is allowed to help
with all closing costs and fees. Those options are called seller
concessions. This loan has no limit to seller concessions except
that the lender's underwriter decides on how much is reasonable.
Unlike a FHA mortgage, there is no "minimum contribution"
required of the buyer.
There is no mortgage insurance required because it is replaced by a 3.5%
funding fee, which, ... and this is the good thing, it can be financed
into the loan. Thus, the 103.5% LTV. (or what ever the fee happens
to be. It changes.)
Another advantage is that there are no reserves required.
Really! Reserves are funds that need to be remaining in the buyer
account after closing the loan. This requirement on other loans
sometimes loses the transaction if the buyer doesn't have enough money for
two to three months of house payments in their savings
This is really a good loan and I don't want you to get the wrong
impression. This is not a sub-prime loan, a place for people with
bad credit or people that won't be able to pay the mortgage on a long term
I would also like to opine as to not putting any money down. If
you can afford to put money down on a mortgage it is to your
advantage. The more you put down, the lower your payments.
Remember also that even a few thousand dollars on a mortgage over 30 years
adds up to a lot of interest.