Buying homes with no money down provides many people the opportunity to own a home when they otherwise would not be able to save for a down payment. However, 100% financing has also been one of the major factors in the rising foreclosure rates. As a result, many lenders have closed their doors to the foreclosure loses. The lenders that remain have changed their guidelines making 100% financing more costly or eliminating 100% financing altogether.

While 100% Financing is still available for borrowers who have good credit scores and can document their income. Borrowers with less than perfect credit, borrowers who can not document income, and investors, will require a down payment. Any financing exceeding 100% has essentially been eliminated. There are two basic strategies for 100% financing.

100% Financing With One Loan

The simplest and most common strategy used for 100% financing, is the single loan approach. The borrower receives one loan with one payment at the same rate. 100% financing with one loan will require Mortgage Insurance of some sort. mortgage insurance  can be paid by the borrower or the lender.

Borrower Paid Mortgage Insurance results in an additional monthly payment to cover the insurance. This keeps the the rate on your loan lower. Borrower Paid Mortgage Insurance (BPMI), can be dropped when the property's Loan To Value drops below a certain level. In some cases, Borrower Paid Mortgage Insurance is now tax deductible. Consult your tax adviser regarding mortgage insurance deductibility.

Lender Paid Mortgage Insurance (LPMI) is paid by the lender in the form of a higher interest rate and payment. This is more convenient than BPMI, however, it can only be dropped if the loan is refinanced. LPMI is tax deductible as it results in more interest paid.

This type of loan can be used for a purchase or refinance. Apply Now!

80/20 Combo

80/20 Combos, sometimes called Piggyback Loans, have become a popular way to obtain 100% financing. By splitting the risk between two loans, borrower's are often able to obtain a lower monthly payment and avoid Mortgage Insurance. However, these programs carry a higher risk of foreclosure and are being eliminated by some lenders in favor of  100% Financing with Mortgage Insurance. The lenders that still allow 80/20 Combo Financing are raising the rates on the 2nd loan to cover their risk. The higher rate on the 2nd often makes one loan a better deal.

The advantage of an 80/20 loan is the flexibility; allowing large number of choices for both the first and second loans. The first loan is usually a conventional fixed or adjustable loan often with an Interest Only Option. The second loan is either a fixed rate second or adjustable Home Equity Line of Credit (HELOC). The guidelines for piggyback loans are as varied as the options. Apply Now!