Home Buying in San Jose>Question Details

Grace, Home Buyer in Mission San Jose, Fr...

How do 0% loans work?

Asked by Grace, Mission San Jose, Fremont, CA Sun May 4, 2008

While shopping for loans we ran into no out of pocket loans which offer 100% financing including the down. So what is the catch and how do these hinder the home buying purchase?

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3
Grace,
There are plenty of programs out there that allow you to get in to a home for 0 down. With FHA loans becoming more prominent, lenders are looking for ways to utilize these loans. With an FHA loan you will pay Private Mortgage Insurance (PMI) which can be very costly. You will pay PMI until your Loan To Value (LTV) is at 78%. We can make this real simple by saying that your home is worth (value) $100, your loan can only be for no more than $78 to be rid of PMI.
Depending on what you are looking at purchasing and the amount that you are planning on spending there are other loans available. If you are looking to purchase for less than 500K and you have a combined income of less than $104K you can look into the ACORN program offered by BofA.
I would be glad to help you find the right lender, who can help you make the proper decisions for your situation.
I wish the best on the search for your home and loan program!

Charles Coachman
0 votes Thank Flag Link Sun May 4, 2008
Grace, how long are you planning on keeping your home? 6 months? A negative amortization loan is not a good loan to have if you plan on living in your home for awhile. It's called "negative" for a reason. Speak to a qualified mortgage broker about all your options and understand how these different loan programs effect your equity. Good luck.
0 votes Thank Flag Link Sun May 4, 2008
Not very well. You pay 0 interest for a certain amt. of time, then the rate jumps up to an exhorbitant interest rate typically with an adjustable rate mortgage. The accumulated interest for the period you don't pay interest can then be tacked on to your original loan amt. making your actual purchase price more. I have not heard of any 0% interest loans. "No out of pocket loans, which offer 100% financing including the down" is not anywhere near the same as 0 % interest. No out of pocket loans typically means that you can get an FHA loan, contributed by a 3% down in a program called HART. Since the inception of the HART Gift Program, thousands of families across the nation have realized the dream of homeownership with a down payment gift from HART! The HART Down Payment Assistance Program assists prospective homebuyers nationally who qualify for a first mortgage loan, but require the down payment and closing costs necessary to purchase a home. The other "zero" is the approximately 3% (depending upon geographic location) in closing costs (of the purchase price) that a buyer is responsible for , but asks the seller to pay and in exchange the buyer adds that 3% to the sales price. No cash is exchanged except between HART and FHA. See the link below. Try to avoid adjustable loans unless you are safely financially solvent. Good Luck. Cindy Vedder
0 votes Thank Flag Link Sun May 4, 2008
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