- The Washington Times - Friday, August 11, 2000

Marketers tell us the best way to get the masses to respond to an advertisement or mailing is to offer something for free. Unfortunately, in the world of real estate, free is not an option. Instead, we can offer zero-down financing.
Generally most zero-down programs require two things: good income and excellent credit. If you don't possess these two credentials, read on if you wish, but only for future planning.
In this economy, lenders have developed various zero-down programs, making them almost as common as conventional loans. Kevin Connelly, vice president and branch manager at Mortgage Edge Corp. in McLean (https://kevinconnelly.com), recently presented a compilation of such programs to the Northern Virginia Association of Realtors' Real Estate Finance Committee. I was pleasantly amazed by how these programs have grown, and I share them with you here.

Veterans Affairs

One of the oldest zero-down programs is still restricted to eligible veterans. It provides a maximum zero-down loan of up to $203,000. There is a funding fee, which increases as the down payment decreases and depends on the military service of the applicant.

VA foreclosure properties

If you're not a veteran but like the VA's loan program, you're not out of luck. VA foreclosures can be viewed on line by potential buyers. For a list of regional offices, point your browser to www.homeloans.va.gov/homes.htm. These homes have been foreclosed and taken over by Veterans Affairs and are available for sale back to the public via a sealed-bid system on the Internet. Non-veterans who want to buy a VA home for a personal residence can acquire zero-down financing through the VA.

Loan assumption

Many loans are assumable, meaning the owner can let the buyer assume the loan as long as the buyer can qualify for the loan. Usually, there is added equity in the process, which could be held as a second trust by the owner. For instance, say a house selling for $250,000 has a remaining mortgage amount of $200,000. The borrower could assume the $200,000 loan and take over payments, then take out a second loan with the owner for $50,000, thus creating a zero-down mortgage.

Community Reinvestment Act loansReinvestment Act loans

Federal regulations require banks to originate mortgages in the markets where they have a retail banking presence. Buyers who meet certain financial criteria income, credit (including credit scores) and first-time home-buyer status can qualify for so-called "giveaway loans." The benefits of such loans include: below-market interest rates, zero down payment or a nominal payment, and no requirement for private mortgage insurance.

Freddie Mac Alt 97

Using this 97 loan-to-value program (the mortgage loan is 97 percent of the value of the house), borrowers can make it a 100 percent loan by using Freddie Mac's liberal version of its original first-timer's program, Freddie Mac Gold. The buyer can use a credit card to take an immediate cash advance to be used as cash for the 3 percent down payment and closing costs. Voila, zero-down financing. For more details on this program, visit www.freddiemac.com/sell/alt97/alt97.htm.
Just a couple notes on zero-down financing. As a general rule, zero down does not necessarily mean no money out of your pocket. There still are closing costs, origination fees, commissions, etc., to consider, which can add up to several thousand dollars. However, the down payment, which usually is the largest expense in buying a home, is nil.
The preceding are just a few of the programs Mr. Connelly discusses. For a complete look at his findings, log on to www.nvar.com and search for "zero-down" under the news section.
M. Anthony Carr has written about real estate issues for 11 years. Direct your questions and comments to 8411 Arlington Blvd., Fairfax, Va. 22031 or sende-mail to [email protected]

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