Q&A: Are There Still Zero-Down Loan Options?

Question: Are there still options for zero-down loans?

Answer: YES!

You can still obtain a mortgage with no down payment. It's not as easy as it used to be, but there are still a few programs out there. Loans that are insured by the VA are still funding with LTV's (loan-to-value ratios) of up to 100%. Also available but not as well known are USDA insured loans. These loans aren't just for farms! USDA loans can be used to fund single family homes in rural areas. Believe it or not- most of Snohomish and a bunch of King County qualifies! There are (as you can guess) a lot of restrictions of both VA and USDA loans, so if you would like to know more, email or give me a call and I can go over a scenario with you.

Some non-government-backed options are out there, but the rates are TERRIBLE and they are nearly impossible to qualify for.

The State of Washington also has a bond program called the "House Key Program" which can allow first-time home buyers who fit a certain set of criteria to purchase with no down payment. I'm not currently able to do these loans, but am working on it. It is directly contrary to my self-interest to mention these loans, as I can not fund them, but hey, you deserve the answers. :)

Q&A: No Fee Mortgage

Question: My coworker got a no-fee refinance? Can you do a no fee mortgage?

Answer: The simple answer is yes.

It is possible for me to give someone a no-fee mortgage. In practice, however, I have funded very few because for most people it's just not a good deal. That's a bold statement, so I'll go a little further to explain my position... Have you ever heard the expression, "There's no free lunch?" That about sums up the situation. The simple fact is that no one works for free. Every person that looks at a piece of paper that you sign has to be paid to read it. That money is going to come from somewhere.

There are two places that it comes from- you directly, or the bank. Banks are smart about this and don't mind paying your fees for you. You might think that you're getting a great deal because you don't pay a bunch out of pocket, but there's a catch- you have to pay a premium interest rate. The banks will give you a higher-than-market rate in exchange for the lack of fees. In the long run it never pays off.

Here is a comparison of a mortgage with fees and without:

	With Fees	No Fees
Loan Amount	$250,000	$250,000
Rate	4.875%	5.5%
APR	5.021%	5.683%
Payment	$1,323/mo.	$1,420/mo.
Due at Closing (estimated)	$4,800	$0 (depending on what is included)

As you can see, there are significant savings in your monthly payment. After fifty months, you come out ahead by paying the fees up front and not financing them. This is good information, but the real story is what happens if you keep the loan for a long, long time. After thirty years the difference in interest that you pay is $30,000. That's a lot of cash.

The moral of the story is that each consumer needs to decide for themselves what the best deal is and how their mortgage is going to incorporate in their greater financial and life plans. My job is to coherently present all options to my clients so that they can make an informed decision.

A Call for Questions

I need help writing my blog from time and you're just the person to help me out! Email me your questions or ideas for my writing and I'll answer them (anonymously, unless you otherwise specify) in my blog.

Also, this will help me better understand what questions are out there and make sure I'm communicating relevant information.

Email Me