Are there any 100% mortgage loans left, or loans where you can buy a home with no money out of pocket? The mortgage industry has changed dramatically in the last few years. I was wondering if any of these kind of high risk loans remain in the mortgage market.

The answer is, yes; but you’re right: the mortgage industry has changed dramatically due to the sub-prime mortgage crisis and the recession in the housing industry. The sub-prime mortgage crisis created a fear mentality among lenders who are afraid now to make a loan that might draw criticism for being scantily underwritten. Consequently, stiffened loan qualification and equity requirements have had a chilling effect on lending, scaring off potential buyers who are afraid of being turned down for a loan and can’t meet the greatly increased down payment requirement.

The recession in the housing industry has created a situation where equities are dwindling daily and lenders who make a loan at 100% of the home value today are faced with a loan to value ratio of 125% in a few months. Consequently, they have gotten out of the 100% loan business.

But, yes, there is 100% lending still available in most locations, with one caveat: you have to be a first-time homebuyer (actually if you have owned a home before, but not within the last three years, you might still qualify as a first-time homebuyer). Contact your state’s housing finance agency (HFA) and ask the about state bond financing for single family residences. State bond financing offers the advantage of 100% financing at below-market rates.

As far as nothing out of pocket, you may have to convince the seller to pay your closing costs, but that might not be hard in today’s market. Have your Realtor help you with that. Also, the state HFA might offer “down payment assistance” as well (and some local, city and county, housing agencies offer down payment assistance, too).

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