While it might sound too good to be true, BancorpSouth out of Tupelo, Mississippi has a mortgage with virtually no fees and no down payment requirement.
The bank’s “Right@Home” loan program gives qualified home buyers the option to purchase a property with just a $500 borrower contribution, making it one of the many low or no-down payment mortgage options available today.
The list of these types of loan programs seems to be growing by the week, if not the day. And it might be the beginning of a scary trend that could usher in another crisis.
At the same time, these loans are different than their predecessors, with virtually all of them plain vanilla 30-year fixed-rate mortgages that require a full documentation underwrite.
In other words, we don’t need to panic just yet, but we should pay attention to the emerging trend of new all-time high home prices and falling down payments.
Right@Home Can Put You in a Home for $500
As mentioned, the Right@Home loan program from BancorpSouth only requires a $500 minimum borrower contribution.
And the mortgage can be for the full purchase price at 100% LTV with “flexible sources” for any down payment and/or closing costs required.
To make the deal even sweeter for prospective buyers, you don’t have to pay any loan origination fees (third-party closing costs such as appraisal and escrow/title likely still apply). And there’s no private mortgage insurance required.
However, as I’ve said before, when the LTV is north of 80%, mortgage insurance is being paid in one way or another, perhaps just not out of the borrower’s pocket upfront or separately. Instead, it’s just built into the rate.
That being said, the mortgage rates on the Right@Home loan program will probably be higher than loan programs that require slightly higher down payments and mortgage insurance, though with rates as low as they are now, a 4% 30-year fixed still sounds pretty darn good.
BancorpSouth did note in their press release that a “substantial portion” of the Right@Home loans go to low- to moderate-income, but didn’t specify if the program had any income limits. I’m assuming it does.
Low-income applicants are defined as having gross annual income less than or equal to 50% of the Estimated Median Family Income (EMFI) for the area in which they plan to reside.
A moderate-income applicant has income greater than 50% and less than or equal to 80% of the EMFI, as determined by the U.S. Census Bureau.
Either way, borrowers who take advantage of the program must complete home buyer education and counseling, which is a good thing considering the liberal requirements associated.
At the end of the day, purchasing a home is a big deal, and while it’s great to give buyers low-cost options, they should know the weight of such a decision. While the upfront out-of-pocket costs may be low or nil, the financial implications long term can still be enormous.
For the record, BancorpSouth lends in eight states, including Alabama, Arkansas, Florida, Louisiana, Missouri, Mississippi, Tennessee, and Texas.
Right@Home Loan Program Highlights
- Borrow up to 100% LTV (zero down)
- $500 minimum borrower contribution
- No loan origination fee
- No mortgage insurance required
- 30-year fixed is only product available (fully amortized)
- Must complete home buyer education course