Creative Financing Techniques for Mortgage Loans

No longer do homebuyers need to come to the table with a 20% down payment plus closing costs. There are many creative solutions for borrowers who lack savings but still want to purchase a home. In many instances, it is possible to purchase a home with no money out-of-pocket. Two good options are 80/20 ?piggyback? loans and government-backed 100% financing.

?Piggyback? loans

Many lenders today offer 100% financing. One of the most typical financing structures is the ?piggyback? loan. This is a two-part loan that includes both a first and second mortgage. The first mortgage is written for 80% of the purchase price and the second mortgage makes up the remaining 20%. These loans allow for the full purchase price to be financed. In addition, it avoids the necessity of private mortgage insurance since the first mortgage is only 80% of the sales price. Negotiating with the seller to pay closing costs allows the homebuyer to purchase a home while bringing no money to closing.

Government-backed loans

In addition to piggyback loans, many lenders offer programs backed by either the state or federal government that allow for 100% financing in one loan. These loans often allow the buyer to finance closing costs into the loan or offer closing cost assistance. In addition, many of these programs do not require private mortgage insurance which keeps the payments reasonable. These loans are specifically aimed at the homebuyer with moderate income and, thus, often have income caps as part of qualification. The property may also need to be within a designated area. An experienced lender can guide you through these options to determine which loan will work for your situation.

A lack of savings should not deter today?s homebuyer. Find an experienced lender who can help you explore all of the financing options available today.

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