100% financing • $0 down
About six years ago I wrote the below article... not much has changed since then.
VA loans and USDA loans are still the 2 programs that Lenders are referring to when they advertise "No money down!" or "100% financing". It's a great headline to get you to inquire with the Lender and from there they hope to get you into a program. Any program.
100% • There is another loan program available if your household income is under 115k. Most of the Montgomery County area (and MD) is eligible. No mortgage insurance, and no 2nd loan. Of course good credit is required. Don't forget in most scenarios there is still $ you will need to cover closing costs and/or have in reserves after closing. It is possible to minimize this, something we can work through the numbers to show you.
If you want to determine what you're eligible for, complete the info here
Buy a home in Maryland with no money down
Posted by BJ Matson on Tuesday, November 27th, 2012 at 1:32am.
Is it possible? Does such a loan still exist?
The quick answer is yes. Not too long ago there were many lenders who offered 100% financing. This was when home values were appreciating fast, and equity was being seen before the ink on the mortgage papers dried. These were $0 down payment home loans in addition to VA & USDA programs.
VA 100%-- you must be eligible for va financing. Military or military related borrower
USDA 100%-- the property must be eligible. It needs to be within a deemed 'rural' area. In Montgomery County & other MD, D.C. and Virginia suburbs these rural areas can be hard to find.
Not VA or USDA eligible? There IS another option right now... If you have very strong credit scores.
You do not have to be a 1st-time home buyer.
It's a much better option than FHA. FHA has very expensive upfront mortgage insurance, 1.75% of the loan amount. That's $4,375 on a $250,000 loan. AND expensive monthly mortgage insurance of 1.25%, which equals $260/month on this same 250k loan. FHA requires a minimum of 3.5% down payment.
If you make over 90k and want a low-down payment loan, I would skip FHA all together and put 5% down to go with a Conventional loan. With Conventional, you won't have the upfront MI, and your monthly MI is cheaper than FHA.
If you make under the income listed above, you are eligible for 100% financing. Not only that, but you won't have ANY mortgage insurance with this loan. This allows you to qualify for a lot more house OR conversely, gives you a much lower payment... all depends on how you want to take advantage. Below I'll give you an example of what your monthly payment and $ needed at closing could look like with this great mortgage option.
Let's say I make $60,000/year. I have no debt and good credit. Running some rough numbers, I should easily qualify for a sales price of $275,000. I can probably qualify for more, depending on how much the property taxes are, and if a condo, how much the Condo Fee is. I found a great 2-bedroom condo near the Kentlands for $245,000 in Potomac Village in North Potomac.
$245,000 loan amount
327 condo fee
182 property taxes
25 HO-6 insurance- for interior, condo fee covers exterior
0 mortage insurance. If FHA, this would be $255!
$1,740 total estimated monthly payment
$0 down payment
$1,740 monthly payment
Now let's determine the total closing costs... Remember, this loan will allow the Seller to help offset these costs.
$750 Title co. fees
650 Lender's title insurance
471 Owner's title insurance
120 Recording fee
1,225 Montgomery County Transfer Tax (your half)
0 Maryland State Transfer Tax- $0 for your half if first time buyer. Otherwise it's $612.50
672.75 Maryland State Recordation Tax (your half)
1,500 total lender fees. Including appraisal and credit report
1,456 Escrow for property taxes $182/month x 8. (6 months + 2 reserves)
290 Prepaid interest. Estimated $29/day. $290 if you closed with 10 days left in month.
$7,134.25 Let's round up and call it $7,500 needed at closing
Depending on our Offer, we can make a 'Seller Credit' part of our Terms.
Let's say we run the sold comparables. Given this research and the property condition, we feel $240,000 is a fair price.
However, to make this do-able for you the Buyer, you would like to reduce your money needed down to $2,500 at closing.
So... we can make an Offer of $245,000 and ask for the Seller to give a credit of $5,000
Thus, a NET Offer of $240,000. The Seller still gets their 240k, and you get the house for $2,500. We can ask for $7,500 help and make it so you need close to $0 at closing.
$400 Home Inspection. Optional but highly recommended.
$100 Radon test. Optional but recommended.
$35 Termite report (WDI). Lender may require.
$___ Homeowners insurance. Pay 12 months in advance
$400 Appraisal. Paid to Lender, who orders appraisal. This is part of the $1,500 included in above Lender Fees.
I look forward to helping you buy your next home. If you will be selling your home, this 100% loan is a great way to market your property if the sales price is under the $350,000 price range. Have me work up a Financing sheet to hand to your potential buyers, and they can call me for more details. We'll get your home sold!
BJ Matson, Realtor®
Home Buying Expert • RE/MAX
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