Can I still buy a Home Without a Down Payment?
Aubrey Clark
October 29, 2007
Over the last decade buying a home without a down payment was synonymous to fogging a mirror, financially speaking. If borrowers could prove that they had a job and weren’t in a witness protection program lenders would probably loan them the money to buy a house. Why not, after all houses were appreciating 3-5% annually and if the borrower stayed in the house 3-4 years banks usually had enough equity to foreclose if need be. Not so in todays market.
Money is tight for today’s banks because they are unable to sell their portfolios that hold the less than perfect borrowers. This creates a cash shortage and forces banks to become stingy with their money. If that weren’t bad enough, FHA just announced that their down payment assistance program loophole has been plugged forcing would-be home buyers to actually put money down again. In the wake of all of this, home values continue to fall making investors skeptical about the properties they allow as collateral.
However there is some good news in this piece because borrowers can still buy a home today without a down payment. Fannie Mae and Freddie Mac have conventional programs that finance up 100% of the home for fair to average credit borrowers. It appears that their philosophy is that it is better to buy a home and keep some money in the bank as opposed to draining your accounts to put some money down.
What lenders are looking for from borrowers with no down payment is their “capacity” to repay the loan. In years past, lenders could “state” income without verification and get away with it, not any more. The number one thing underwriters are looking at is the borrowers debt to income ratio. What this really means is that banks will allow people to buy a home without saving for a down payment but not saving for a down payment and over spending is bad.
Other than that, the100% home financing programs are pretty forgiving as far as credit is concerned. Also, with housing at an all time low there are some pretty good deals out there for savvy shoppers as well. Pair this scenario up with a starving loan officer (yours truly) and a lonely Real Estate agent and today’s home buying prospects look pretty good for the average Joe.
Money is tight for today’s banks because they are unable to sell their portfolios that hold the less than perfect borrowers. This creates a cash shortage and forces banks to become stingy with their money. If that weren’t bad enough, FHA just announced that their down payment assistance program loophole has been plugged forcing would-be home buyers to actually put money down again. In the wake of all of this, home values continue to fall making investors skeptical about the properties they allow as collateral.
However there is some good news in this piece because borrowers can still buy a home today without a down payment. Fannie Mae and Freddie Mac have conventional programs that finance up 100% of the home for fair to average credit borrowers. It appears that their philosophy is that it is better to buy a home and keep some money in the bank as opposed to draining your accounts to put some money down.
What lenders are looking for from borrowers with no down payment is their “capacity” to repay the loan. In years past, lenders could “state” income without verification and get away with it, not any more. The number one thing underwriters are looking at is the borrowers debt to income ratio. What this really means is that banks will allow people to buy a home without saving for a down payment but not saving for a down payment and over spending is bad.
Other than that, the100% home financing programs are pretty forgiving as far as credit is concerned. Also, with housing at an all time low there are some pretty good deals out there for savvy shoppers as well. Pair this scenario up with a starving loan officer (yours truly) and a lonely Real Estate agent and today’s home buying prospects look pretty good for the average Joe.
Print
Email
