0% Down Gone? Getting Creative with Home Loan Options
For those of you in the St Cloud area who were planning on purchasing a home with 0% down, your loan options are disappearing fast. It sounds like as of April 7th, 2008 Freddie Mac will follow Fannie Mae's lead in declaring the majority of the areas covered by the St Cloud MLS declining markets. This means that as a minimum for a conventional loan in these areas buyers will need 5% of the sales price. Gone are the 80/20 conventional loans that were so prevalent just last year.
So what does a home buyer with no money do?
How can you get into a home with 0% down?
The answer: Get creative.
I know the most common program being used today is theFederal Housing Administration's (FHA) loan with 6% seller paid closing costs and down payment. As long as the home appraises, a buyer can ask the seller to pay the minimum 3% required down payment and up to 3% in closing costs. I have seen about 12 local lenders in the St Cloud area utilizing this new product.
What does this mean to you as a buyer?
Answer: You are basically pulling out the equity on a home purchase (assuming that you purchase a home with some instant equity) to pay for your closing costs and down payment. This will make it so that it takes a few years before you can even think about re-selling a home. It's perfect if you plan on staying in the area for many years to come, but not if you aren't sure.
Numbers for reference:
List Price = $141,000
Offer = $150,000
Seller Pays = $9000 ($4500 for minimum 3% down, 3% for closing costs)
Effect = Seller gets $141,000 / Buyer mortgages $150,000
As long as the home appraises for at least $150,000 this deal works.
If you have heard of some other creative financing options, and you are afraid about their implications, post them here for everyone to see. If they are good, I would love to be able to tell my buyers about them.
Jason Tangen, GRI - Real Estate Broker Associate with Edina Realty St Cloud MN
http://jptangen.featuredblog.com - Blog postings on www.REALTOR.com
