100% Mortgage Financing

January 20, 2011  |  

In most areas 100% financing on a house is a thing of the past. The only two common types of mortgages that allow 100% financing are USDA Guaranteed Rural Housing Loans and VA Loans. They both have pretty big restrictions. The VA Loan has an obvious restriction. You have to be a veteran or in some cases, the spouse of a deceased veteran. The USDA loan on the other hand is restricted to rural areas. You cannot buy a house in a city with a population over 20,000.

The USDA provides a map that your loan officer can reference to see if your desired area is allowed. If you do live in an eligible area, and you need 100% financing a USDA loan is an excellent mortgage, but there are more layers you have to pass through to qualify for this loan. The biggest one is your income. You cannot make too much money and you cannot have too much money in the bank. The monthly income limit is determined by the number of people in your household. The limits are pretty generous, but they take into consideration all the household income. So, if you have a son or daughter who is not a minor living with you and working, their income is included in the calculation.

The next best thing to 100% financing is an FHA loan. A down payment is required with this loan in the amount of 3.5% of the purchase price of the house. The seller is allowed to pay all your closing costs, so if the purchase contract and loan are structured properly you will only have to come up with the down payment. This down payment can be a gift from a blood relative. FHA actually does have a program that will allow 100% financing if you are buying a house that FHA has foreclosed on. Not all of their foreclosures qualify for this loan. You will need to talk with your realtor about this and they will have a resource where they can find homes that are involved in this program.

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