Monday, October 18, 2004

Los Angeles Times report on no-down buyers

Sunday's Los Angeles Times, Real Estate Section, featured an article about buyers who are using 100% financing, as they are not able to save fast enough to keep pace with the real estate market.

If you are considering becoming a "zero down" buyer, you should know that most lenders would require that you have excellent credit. Some lenders charge a higher rate of interest for 100% financing. Plus, it doesn't mean you don't need any cash ... you may still need to come up with some money for closing costs.

There are other issues involved with 100% financing which we will not go into here. But from a buyer's point of view one of the most significant considerations is ... what happens if the market goes down? Then you may end up owing more than the property is worth.

We have had several buyers get 100% financing, but their lender structures it as two loans ... one for 80% of the value, and one for 20% of the value. In this way, the borrower does not have to pay PMI (private mortgage insurance).

As always, if you are interested in further details about 100% financing, we would recommend you speak with your lender. Ask questions, and make sure you understand the ramifications of whatever financing you are considering.

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