Why is 100% Financing So Hard to Find?

January 18, 2007 No Comments »

A little less than six months ago you could finance a home with no money down with few problems. Even if you had marginal credit, no assets, and a relatively soft employment history.

These days you’ll spend a lot of time shopping for 100% financing even if your the most well-qualified borrower out there. You may even fail to find one bank or lender willing to offer you financing without a down payment.

The reason is because many of the banks and mortgage lenders offering 100% financing were losing money when homeowner after homeowner failed to make the first payment, leaving the bank with the keys and a vacant property.

This scenario seemed to be so common that many banks and lenders offering 100% financing closed down, or simply withdrew the loan program to avoid shutting their doors.

It seems many homeowners were willing to buy properties with zero down in the hopes of turning a quick profit, but as home prices slid, borrowers simply walked away with little more than a credit ding.

Of course, 100% financing will come back, this time with higher interest rates and mortgage insurance that protects banks and lenders in the case of a default or foreclosure.

While it may not be as easy to qualify as its predecessor, it should stick around a bit longer with protections in place for the banks and lenders offering it.

Leave A Response