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Are NoMoneyDown Mortgages Making a Comeback .pdf


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Are No-Money-Down Mortgages Making a
Comeback?
Economists agree that no-money-down mortgages were largely to blame for the housing
market crash nearly a decade ago. Despite that fact, it seems that loans with no-moneydown are making a comeback in some areas. Unlike the down-payment free loans in recent
past, these mortgages come with more stringent criteria that bankers claim will limit the
number of defaults. How are today’s no-money-down notes approved, and is it possible you
might qualify? Here’s what you need to know.
Reason for the Comeback
After the housing bubble burst, financial institutions tightened the criteria for approving
loans. Rather than allowing small down payments (or waiving them completely), many
began insisting on the traditional 20% down. This lowered the risk, but left many
consumers completely unable to purchase a home.
Strong home sales are an indicator of a solid economy. As such, the fact that many people
are unable to purchase a home resulted in a longer-than-usual recovery. And without
economic recovery, even fewer people would achieve their dream of homeownership in the
future. It became very clear that a compromise was in order.
Today’s No-Money-Down Loans

To achieve a balance, some lending institutions have re-implemented no-money-down
loans, but with a twist. These loans would not be given to just anyone, but instead would be
reserved only for those with a stable financial history. Some of the criteria used to assess
this includes:
· A healthy credit score of at least 720.
· A stable work history that includes employment in the same field for at least the past two
years.
· Being able to provide proof of income. More stringent proof could be needed for selfemployed workers or freelancers.
· Having at least two months’ worth of mortgage payments in a savings account.
The type of home is usually restricted as well. Most lenders only allow no-money-down
mortgages on owner-occupied property of a certain dollar amount. This ensures that loans
are not used for investment properties or for extravagant purchases.
Secured by Financial Institutions
Many down payment free loans are secured by individual financial institutions rather than
government entities such as Fannie Mae or Freddie Mac. This means there is great incentive
for loan officers to get these mortgages right. As such, you are more likely to be approved
based upon your individual merits rather than a set of numbers. The odds of you developing
a lifelong relationship with your financial institution is also much greater.
Should you Consider?
No-money-down mortgages are convenient, but they do come with some disadvantages. For
example, you may pay a higher interest rate or be subject to an adjustable mortgage. These
things may not be a problem if you plan to refinance your loan within the next five years or
so.
Is it possible to obtain a mortgage without making a substantial down payment first? The
answer is yes, but only under certain circumstances. If you are otherwise qualified but just
cannot seem to come up with a down payment, this type of loan may very well be right for
you.


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