I’m approved for a 100% mortgage, why are they asking for money?
March 29th, 2007 by Mark FlandersThis is a conversation I seem to have often in my day-to-day life as a Loan Officer. “Why do I need cash, if I can get a Zero Down home loan?” There seems to be some confusion about what a 100% mortgage is, and what it is not. Hopefully, this article will help clarify things if you’ve ever wondered how it works.
Most of us, especially when faced with our first home purchase, have very little to work with in the way of cash. It can easily take years to save a few thousand dollars. Once we do save some cash, we are hesitant to part with it for any reason. Purchasing real estate is one of the few reasons we feel comfortable separating ourselves from the greenbacks we spent so much time and effort gathering. Kitsap real estate is a great place to tranfer your cash. Property values go up over time, unlike things like cars, which lose value the longer you own them.
When you purchase real estate with a mortgage (or even without one), there are additional costs to think about. Lenders will invariably want to see a Title Report and an Appraisal among other things. Credit reports cost money. There may be the cost of a home inspection to consider or a Funding Fee or a Flood Certification or a Underwriting Fee or any of a multitude of fees that you will only need to pay if you are getting a mortgage. These fees add up. They add to the cost of purchasing a home, but they are not part of the purchase price.
When a lender agrees to approve a 100% mortgage, the lender is agreeing to pay for the entire house, not the entire transaction. The cost of the home and the cost of the transaction are two completely different numbers. This is the reason why many first time homebuyers are surprised to find that their new Zero Down Mortgage Approval requires them to come up with thousands of dollars. The lender is agreeing to pay for the house, but not the additional fees. If the lender did pay for all the fees, the lender would be lending more than the value of the home. Loan fees typically cost between 2% and 5% of the loan amount. So if the lender made this loan, they would be making a 102% or 105% mortgage.
A simple way to think about it is to remember that loan fees do not affect the value of a property. If a home has a price of $200,000 and the transaction fees are $5,500, the home is still only worth $200,000, although you will need $205,500 to pruchase it.
Now how about some good news?
Transactions where a buyer needs both 100% financing and the money to cover closing costs are very common! Most first time homebuyers are in this position. And this type of transaction can be done. It just requires a little creativity, the right loan program and a property that is not priced at the very top of it’s market.
Using the example above, what would happen is the buyer and the seller would need to agree to raise the price up to $205,500 with the seller agreeing to pay $5,500 of the buyers closing costs. As long as the Appraisal comes back at a value of at least $205,500, and the lender is made aware of what is transpiring, this deal will work. In most cases, it works flawlessly. Every one of the transactions like this I have handled has closed. The buyer was thrilled, the seller was happy and the lender was content.
Tags: bremerton real estate financing, kitsap zero down mortgage, port orchard real estate financing, poulsbo real estate financing, silverdale real estate financing
These articles run the gamut from shocking to discouraging. Many of the articles blame this situation on the sub prime lending practices in recent years. Many of the articles predict that First Time Homebuyers will no longer be able to attain the American Dream! Many say that 100% financing is gone for good. I say: Don’t believe everything you hear (or read). Zero Down Home Loans are alive and well.
One of the most luxurious romantic getaways in the Pacific Northwest is the Alderbrook Resort & Spa. Situated along the spectacular shoreline of Hood Canal, with a backdrop of the majestic Olympic Mountain Range, the Alderbrook Resort & Spa offers intimately indulgent accommodations, state-of-the-art conference & event facilities, a full-service spa, and a first-class restaurant.
Boating enthusiasts will enjoy tying up to the 1,500 feet of mooring dock at the Alderbrook Marina, complete with electrical, water, telephone, and wireless internet services. Kayak and paddle boats are available for rental, or even arrange to fly on a seaplane!
Many residential properties here on the Kitsap Peninsula have a private or shared-party well as their water source. As a Buyer’s Agent, I normally include NWMLS Form 22R (Well Inspection Addendum) along with the Purchase & Sales Agreement. This addendum requires that the Sellers disclose how many connections are served by the well, and verifies an adequate supply of household and yard water to the property. In addition, if required by the Buyer’s Lender, the Sellers will provide, at their cost, a health letter from the County to certify that the water is free from any biological, bacteriological, or chemical agents. This process requires that a water sampling be taken by an approved third party testing lab.
One of the challenges when relocating to a new area is finding all the best places to shop, especially for furniture.
The showroom features Traditional, Classic, and Asian style pieces. Specialty rooms display wall art, lamps, mirrors, Asian antiques, and garden furnishings. A “Walk-Through” gallery helps to give buyers ideas on how to arrange pieces that look great together in living room, dining room, bedroom, or office settings. Ideas never cease at the Northwest Design Center and Furniture Gallery.
