No down payment mortgages have taken much of the blame for the mortgage market meltdown and the downfall of the housing market. It seemed that the only houses that were selling were being sold to those We Buy Ugly Houses companies. Even so, many lenders are tipping their toes back into the zero down market. Before the great recession zero down mortgages were common place, particularly for first time buyers and for military veterans under the VA mortgage program. Back in the day it seemed that anybody with a pulse could get mortgage financing. Many believe that these relaxed lending standards played a big role in the housing crash and the on slot of DFW Foreclosures. Lenders responded by tightening qualification criteria to the point that even the National Association of Realtors (NAR) warned that the housing recovery would be hindered by these overly tight lending conditions.
These days, while not widespread, zero down mortgages are popping up in various cities with some credit unions claiming success in their zero down payment programs. What are the lending conditions under which a lender may offer a zero down mortgage? One of the largest credit unions in the country offers a zero down mortgage with no mortgage insurance and allows for seller paid concessions. Their average mortgage is around $235,000 and targets first time buyers. This credit union and others like it keep these mortgages in their own portfolio and servicing them there selves. Qualification criteria for these mortgages include membership in the credit union, sufficient income and cash reserves, and a good credit rating. If you are in the military or served in the military in the past you have the option of using a zero down payment VA insured mortgage. Generally, VA loans have the same qualifying guidelines as FHA insured mortgages. As the real estate and mortgage markets improve we will see new zero down and low down payment programs being offer to home buyers.