Home Buying in Akron>Question Details

Cindy, Home Buyer in Cuyahoga Falls, OH

is there such thing as 0% financing on buying a home???

Asked by Cindy, Cuyahoga Falls, OH Sun Jun 1, 2008

it was in an ad and when i asked about it i got no answer.
i've never heard of it before, and couldn't find anything on the internet.
ohio

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well then who owns the property at the end of the ten years?
if you make all your payments on time then you would pay a total of $100,000 in ten years. so you would not have to pay interest unless you get behind in payments???????????????????

so if you make them all on time then what is in it for the bank??????????i cannot see them doing anything for nothing
0 votes Thank Flag Link Sat Jan 10, 2009
If it is a Sharia compliant loan, it works like this:

You and lender agree to buy property today a certian price... let's say $100,000

You and the lender agree that at the end of the contract term the value will be higher... let's say $200,000 after 10 years.

During the term of the loan, you grandually buy out the lender in level monthly payments. Using the figures above, the monthly payment would be $200,000 - $100,000 / 120 months = $833.34 per month.

Sharia law prohibits usury, so there is no fee (interest) for using the lender's money to buy the home. Essentially, Sharia law looks at this as you buying the home from the lender for the home's future value. Another way Shaira law looks at the loan is in the form of rent credits from the buyer to the lender, very much like a lease purchase. In both cases buyer and lender are vested in title at close of purchase.

I'm glossing over the fine details, but it truly is a "no interest" loan. The lender is banking on a return from the future value of the home purchased in partnership with the buyer; the buyer guarantees the return to the lender. From a lending perspective, they are somewhat fun to underwirte and close since the terms are so unusual from standard Western mortgage financing, yet it is compliant with US mortgage regs.
0 votes Thank Flag Link Wed Aug 6, 2008
The loan was designed to be Sharia compliant but you don't have to be Muslim to get it.

The Equal Credit opportunity Act (ECOA) prohibits a lender from asking about religion or making a loan decision based on religion.
0 votes Thank Flag Link Sat Jul 26, 2008
what if you are not muslim or a minority?
0 votes Thank Flag Link Sat Jul 26, 2008
There are several banks throughout the US that offer, No Riba, Islamic Financing (0% interest)

http://tinyurl.com/5zrwk4
Web Reference: http://www.lariba.com/
0 votes Thank Flag Link Thu Jul 24, 2008
how would your deal work bob?
0 votes Thank Flag Link Thu Jul 24, 2008
It's certainly possible. It may have been a private lender, or some sort of teaser rate.

Let's consider a private lender. Suppose there's a house that the comps suggest is worth $330,000. You put 10% down, or $30,000, leaving a balance of $300,000. If you financed that $300,000 at a 6% interest rate over 30 years, you'd pay about $1,798 in principal and interest.

You could still pay $1,798 a month at 0% interest. Just adjust either the purchase price or the length of the loan. Shorten the loan to 167 months at 0% interest, and you'd pay off your $300,000 mortgage. Great deal for you. Or the seller could raise the mortgage amount to $644,000, and you'd still pay off your 30 year mortgage at approximately $1,798 a month. And while the house wouldn't appraise for that, who cares? It doesn't have to appraise if the seller's doing the financing.

Or you can work the numbers a different way. If you put a lot more down, your amount financed would be less. Let's say you put 50% down--$165,000. Now your mortgage would only be $165,000, and you can play with those numbers. But here's the interesting part: You put $165,000 down. Let's say the seller has an investment opportunity that will return 12% interest. If he invests that $165,000 at 12%, then that's the same as 6% interest on $330,000.

There are a lot of other creative things to do. And, frankly, that's not even my field of expertise. But I know people making lots of money dealing with discounted notes and mortgages, and other similar activities.

And keep in mind that even conventional lenders offer reduced interest rates in return for payments of points up front. You can't get the interest rate down to 0%, but you can certainly get a very low rate in return for more payment upfront.

And, more up my alley, I can think of numerous ways to do it with lease-options, equity sharing, and land trusts. The basic structure would be a relatively long time frame. When the property would be sold, you'd get back your initial contribution. The investor would get back his initial contribution. Then you would get back the remainder up to the initial purchase price. The the investor would receive profits calculated by a percentage return on his initial contribution. And finally, you and the investor would divide any amount received over that.

The bottom line is that there has to be profit in it somewhere, for someone. But there are dozens of different ways to produce a profit with 0% financing.

If you get the details from the advertiser, take the figures to an accountant or CPA just to make sure that it's a reasonable deal for you.

Hope that helps.
0 votes Thank Flag Link Thu Jul 24, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
i can do it !...bob mcclure mortgage now- farmington, michigan (248) 806-0366....i am licensed in ohio
0 votes Thank Flag Link Thu Jul 24, 2008
CHRISTINA..........IT WAS FOR A MORTGAGE AND NOT A CASH SALE.
0 votes Thank Flag Link Tue Jun 10, 2008
0% financing would be a cash sale. 100% financing is available, meaning no money down. Right now, Real Living Mortgage (a division of Wells Fargo) is offering a 1% interest rate buydown the whole first year! If interest rates are 6% then you would only pay 5% the entire first year! Please contact me for more information.

Christina Asad Edwards, REALTOR
2006 & 2007 Sales Masters Top Agent
Christina.AsadEdwards@RealLiving.com
http://www.teamedwards.info
mobile or text 937-205-4741
office 937-573-0082
Real Living Realty - #1 in OHIO!
Realty, Mortgage, Title, Relocation
Web Reference: http://www.teamedwards.info
0 votes Thank Flag Link Mon Jun 2, 2008
There are good first time buyer programs but not that good. Maybe they meant no money down and yes those loans are available thru different programs. Good luck.
Web Reference: http://www.liveinakron.com
0 votes Thank Flag Link Mon Jun 2, 2008
In Ohio if you are a first time Home buyer ( have not owned a home for 3 years) you can apply for a home loan at 100% of purchase price. These are backed by the state of Ohio and have a good interest rate.

Here is the link to the Ohio Housing site
.
http://www.ohiohome.org/homebuyer/intro.htm

.You should be able to get this loan through most banks and mortgage bankers. A lot of mortgage brokers do not have access to this.

Good Luck with your search.
Web Reference: http://www.Find1Home.com
0 votes Thank Flag Link Mon Jun 2, 2008
I haven't heard of it either.
No bank that I know of is taking those risks now. Must be a private party.
Have an agent or mortgage broker give them a call and see if it passes the "straight face" test.
0 votes Thank Flag Link Mon Jun 2, 2008
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