NO
MONEY DOWN purchase programs available for some credit grades. Programs available as single loans or combinations.
Single Loans: If your priority is the lowest interest rate possible, the 97% loan-to-value
option is your best choice despite the addition of PMI (Private Mortgage Insurance). A 100% loan increases the rates quite
a bit and may require mortgage insurance as well. The average no-money-down-single-loan has an interest rate 1.0%-1.75% higher
than normal rates. I generally recommend a 1st and 2nd combination mortgage (described below), but a single loan option is
less complicated and can close faster. It also usually allows for greater leniency with credit problems than does the combination
loan.
On programs where you do not have Mortgage Insurance, the higher interest rate may be worth it because sometimes
you can qualify for a loan with the bank but have the mortgage insurance (MI) company turn you down! You may even have 3%
to 5% down but can't pass MI requirements so you must go with the higher rate lender anyway.
We also have
some programs that will give you a single loan of 103%, 107% or 110% of the purchase price. The extra money can pay bills
needed to qualify or pay the closing costs for a true no money down purchase.
Combination Loans:
Combination loans are sometimes called 'piggybacks'. A major advantage is that you can have a 1st loan
that stops at 80% loan to value, so you get the very lowest rates without having to pay MI (Mortgage Insurance). That saves
around $100 a month on an average priced home.
A 2nd loan is then used to fill the difference between the 1st
loan amount and the total price. It can be 'institutional' (from an actual lender) or seller carryback. Some people
who are putting as much as 10 to 15% down use these anyway instead of one new loan just to avoid the PMI. You may see the
terms 80-10-10. This means 80% 1st loan, 10% 2nd, and 10% down. Same for 80-15-5, etc.
These 2nd loans can go
even higher than the price--to as much as 110%! Its not only no-money-down but actually gives you extra money to pay bills
if you need less debt to qualify.
The seconds are either regular fixed rates or floating equity lines. See our
section on
Equity Loans to learn more about them.
