During the recent housing boom there were loan programs that fueled the rapid rise in home ownership. One of the main driving forces behind the boom was 100% financing. This financing made it possible for people to purchase a home with no money of their own committed to the transaction. The loan covered the purchase price of the home and the seller could give a concession to the buyer to pay for all of the buyer’s closing costs, pre-paid items and escrow reserves. Some programs required the buyer to come up with at least $500.00 to put in to the transaction but this made home ownership available to people with decent credit and verifiable income. Later the loan programs became less restrictive as no money was needed from the buyer and income did not need to be verified even for those buying investment properties. Easy loan programs created opportunities for more people to purchase Real Estate. The demand for Real Estate created high appreciation rates in the value of homes. This helped protect banks from losing money on these loans if they had to take the homes back from defaulting borrowers. All of this changed around August of 2007 when the housing boom went bust. One of he main reasons was the elimination of 100% financing. I did not happen over night. The default rates on home loans began to rise and this caused the lender’s and mortgage insurance companies to tighten their lending guidelines. This eliminated certain potential home buyers. The reduction in the number of buyers slowed demand. The increase in defaulting home owners created more homes for sale. This caused home values to slide backward. Lenders responded by tightening guidelines and this exacerbated the process. Soon there were no more 100% financing options for most buyers.

So, there is no more 100% financing as far as most people know. There actually are a few loan programs that do not require down payment funds from the buyer. They are much more limited but are available for a surprisingly large number of borrowers including those with less than perfect credit. Here are a few options:

VA Loan: For veterans who are eligible, this is a great mortgage. It does not require any money out of pocket from the buyer at closing, rates are as good as conventional 20% down loans, and credit scores can be as low as 600. The program even allows the seller to pay off a limited amount of the buyer’s credit debt. Veterans can contact the VA to confirm their eligibility.

USDA Loans: This loan program is available to buyers purchasing homes in certain limited geographical areas. These areas are outside major urban centers but often not too far out. In the Seattle/ Bellevue region these areas include Snoqualmie and northeast Woodinville. Sellers can pay for the buyer’s Closing Costs, rates are comparable to FHA loans. There are income limitations for the buyer but they are not too restrictive. Contact Eastside Professionals for a free analysis of your eligibility.

Down Payment Assistance: This program is available to residents of States or municipalities that offer assistance to home buyers. In the State of Washington this program is available through the State Housing Administration to buyers within certain income limitations. There are no geographical restrictions. The program is named House Key. The state supplies, what is essentially, a second mortgage to replace the normal minimum down payment. Borrowers are required to complete a course on home ownership. Only certain approved lenders can close these loans. This program is available through Guild Mortgage for Eastside Professional’s clients. The City of Tacoma has a similar program for homes in certain restricted locations.

Guild Mortgage Proprietary Program: This option is unique to Guild Mortgage and available to Eastside Professional clients. It works only with properties purchased significantly under current market value. The program is utilized extensively by investors purchasing foreclosed, bank owned and distressed homes. It can be used for anyone even those buying owner occupied properties. The end result is a buyer can be in to a home with little if no money of their own out of pocket. There a certain rules that Guild Mortgage has the ability to work around that other lenders cannot. This is due to Guild’s structure and status with Fannie Mae. The program involves a two step process. The crucial element is the property being acquired must be purchased significantly under current market value. One of the great benefits of the current market is there is a tremendous amount of distressed Real Estate available. I suggest using a Real Estate agent that is familiar with acquiring distressed properties. Some agents have inside contacts with bank asset departments. If you need a referral to a qualified agent I can make an introduction. To make the program work the property has to be purchased at 70 to 75% of the current market value. The process involves purchasing the property with temporary financing that is 100% of the purchase price. That loan is then refinanced in to a permanent loan within 30 days. This process allows us to capture the equity that the buyer captures upon purchasing under market value. We can provide the temporary purchase financing. There are significant costs for this option. The buyer can arrange their own temporary financing but will need help writing a Note and Deed of Trust on the property purchase. Here is an example: buyer purchases a home for $210,000.00 that is worth $300,000.00. The purchase is funded by a temporary loan that costs the buyer $15000.00. The temporary loan is refinanced at a balance of $225,000.00 plus closing costs. This puts the new balance below 80% of the current market value which prevents the requirement of mortgage insurance that any low down payment loan requires. Contact Eastside Professionals for details.