The Movement Toward Zero-Down Mortgages, Should You March Along?
Say hello to the newest low, or shall we say, zero down payment program to enter the home purchase market. Through Fort Mill, South Carolina-based Movement Mortgage, LLC’s program, consumers may be able to buy a home for no down payment.
For a sweet deal like this, you’ll surely be asking, “What’s the catch?” Well, let’s get to know the program better, take a look at today’s down payments, and weigh the implications of having a zero-down mortgage.
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Movement Mortgage Deal
“It’s one more way we are leading a Movement of Change in our industry and communities,”said Movement Mortgage on the launch of its assistance programin June.
The lender under its Movement Assistance Program offers down payment assistance grants for qualified borrowers of up to 3% of their home’s purchase price and the remaining 97% will be financed. The mortgage will be repaid as a 30-year traditional mortgage.
In the true style of grants, the down payment assistance is non-repayable. It does not also come with a promissory note, a second loan or second lien that evidences repayment of the grant.
Movement Mortgage sets income and asset requirements for prospective borrowers, examining their needs and income based on where they live.
The Deal with a Down Payment
Today’s standard down payment is 20%, a far cry from the time when 50% downpayment is the normbut a feat nonetheless to achieve. That is not to say that buying a home with less than 20% is virtually impossible.
Proof are low-down-payment programs between 0% and 5% from FHA, VA, USDA and the agencies (Fannie Mae and Freddie Mac). Among direct private lenders, Quicken Loans, Fifth Third Bank, Guaranteed Rate, and most recently, Movement Mortgage require 0% down. This way to more mortgage lenders.
Life Saver, Danger?
Putting nothing on your home is a life saver. It’s one worry less as you have to settle costs and fees to close the deal, something between 2 and 5 percent of the purchase price.
The main downside however to a low downpayment is the mortgage insurance. It is added to your monthly mortgage payment and can only be discontinued if the program allows for it.
Another concern is the lack of equity in homes with little to no down payments. Equity is a cushion that protects homeowners in times of declining home prices and prevents it somewhat from becoming underwater.
Movement Mortgage aims to remedy this scenario by setting a 3-percent threshold on its assistance. This means that the highest down payment grant a borrower can qualify for is 3%; the rest may have to come up with funds for a down payment.
Other potential downsides to a low/zero-down mortgage are higher mortgage rates and little bargaining room to negotiate mortgage terms.
To be fair, the rate and terms of your mortgage would depend on your circumstances. It’s best to ask a lender about your options here.
No Down Payment? No Problem!
We know how much you really want to own a house. You are working hard for it; saving and growing your reserves to finally be able to qualify for a good loan. There’s just one hurdle that’s holding you back down payment.
Why is There a Need to Put a Down?
Back in the days, before the housing crisis, it was easy to purchase due to mortgage loans with a low or zero down payment. People can find funding for their dream residential property without paying any upfront fee.
Then, the housing bubble burst and sent the whole housing market crash. The negative effects rippled throughout the whole U.S. economy like dominoes falling down one after another. The federal government and other private lending bodies wanted to control the damage. In their attempt to repair the housing industry, the 20 percent down payment became a standard.
Lenders found out that a down payment reduced the risk of borrowers going into default. They have identified that a borrower who has shelled out 20 percent initially will less likely stop paying because it would be a great financial loss on their end as well. The higher the down payment, the lesser chance of default. The bigger the amount paid affront, the more secured the lender becomes.
No Funds to Make Down Payment? No Problem!
It does not mean though that all the zero down payment loans are extinct. There are still many loans that offer such benefit. It may come with stringent qualification requirements, but the 100 percent financing may very well explain why.
We are highlighting three zero down payment mortgage loan programs. One of these options can very well be the answer to your down payment dilemma.
Movement Mortgage: Movement Assistance Assistance (MAP)
Mortgage Movement is committed to its mission of putting American families in homes. Thus, the company has come up with a program that allows a borrower to purchase a home with no down.
This is available for first-time homebuyers who have struggles to look for affordable property purchase financing and have been working really hard to afford the upfront cost.
To help the borrower with equity, Movement Mortgage offers a grant for up to 3 percent of the home’s sales price. Repayment of this grant is not even required. Applicants who are eligible will get 97 percent of conventional financing.
To help make ends meet and to provide qualified individuals a safety cushion, MAP has an optional feature that provides a job loss insurance for two years. The insurance can be availed by non-self-employed workers who become involuntarily unemployed. The job loss insurance covers up to six months of mortgage payments of up to $1500.
>>Learn more about MAP and other Down Payment Assistance Programs>>
Government Programs Providing Zero Down
The USDA helps many rural dwelling families become homeowners. Its home loan is known not only for the zero down payment option but also for its lenient credit requirements.
It is not a secret that there are closing costs and funding fees. They can be rolled into the loan. Even with the additional cost, it still remains as one of the most favored programs. Because of its affordable rates, low to zero down payment, it is considered a great access to funds for homeownership.
>>Find 100% Mortgage Financing Today>>
For American veterans, in active-duty servicemen, and qualified members of the National Guard and Reserve, there is the VA Home Loan.
The VA does not make the loan, it only guarantees them. The loan’s financial backing comes from private lenders. The loan can come with a zero down payment, but this will factor in when the funding fee is rolled in. It can be paid upfront during the closing or it can be financed into the loan.
The amount of funding fee will vary depending on several factors. In the general sense, a qualified veteran or active-duty member of the military will have to pay 2.15 percent funding fee. That is if he or she is a first-time homebuyer and proceeds with the no down payment scheme. For eligible National Guard and Reserve members in the same case, a 2.4 percent funding fee may apply.
Now, what’s keeping you from homeownership? These three options allow you to make that dream a reality.
Learn about each of the loan’s specific eligibility requirements, interest rates, loan terms, and other costs. Talking to a lender will help paint a better picture for any possible happening in the future.
.>>Look for reputable lenders near you.>>
Meet the Newest Acronym in Zero Downpayment Mortgages: MAP
For the first time in a decade, the number of first-time homebuyers surpassed the number of first-time renters. Just within the first quarter of 2017, there have been about 854,000 new-owner households, compared to only 365,000 new-renter units.
Will this change the stats and fuel an increase in purchase mortgage applications, which, as we can recall, decreased by 4.3 percent year over year in April?
It probably will. Now, especially, with the push of a new assistance program recently rolled out by South Carolina-based company Movement Mortgage.
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A movement forward
So what makes this assistance program so special?
The Movement Assistance Program or MAP, at its core, gives qualified borrowers access to a conventional mortgage financing, with the added advantage of a 3 percent down payment grant. That means that if you’re a first-time buyer having issues with finding the money to pay for the hefty down payment, qualifying for the MAP will sweepingly solve your problem.
Typically, a conventional home loan requires 20 percent to as little as 3 percent down payment. With MAP, the down payment assistance of 3 percent (of the home’s sale price) is considered non-repayable and is granted directly by Movement Mortgage. The remaining 97 percent is financed. The program, however, strictly caters to a 30-year conventional loan.
But this does not spell out everything. Aside from the down payment assistance and the financing support, MAP also provides a financial buffer to any unforeseen job loss. Its job loss insurance coverage, available to non-self-employed borrowers for two years, will pay up to 6 months worth of mortgage payments, with a maximum monthly benefit of $1,500 in the event of the unexpected.
This is a major help to many qualified homebuyers who still find down payment a significant roadblock to owning a home.
>>Find financing options that fit your needs>>
The questions abound
But what’s the catch? There are a few other mortgage programs today that require no down payment and they are all under the federal banner – VA and USDA loans, for example. So you might get suspicious about the reliability of MAP – it’s simply too good to be true!
The thing is, there is still your mortgage insurance. If you take out a home loan with less than 20 percent down payment, you will have to pay for a premium that is wrapped to your loan payments. A private mortgage insurance may cost you around 0.5% to 1% of the total loan amount annually.
Then there’s the rates. It’s too naive to expect MAP’s rates to be at par with regular conventional financing programs. True, it may just be a percentage or two but a detailed calculation of even a single point difference in interest rates can amount to thousands of dollars of potential savings throughout the life of the loan.
And while it’s good that a 3 percent down payment assistance is given, that will not secure you from the possibility of falling underwater on your mortgage. Once a home depreciates and its value in the market decreases, you could end up owing more on the home than it is worth.
Indeed, it’s a wild opportunity that comes rarely and it’s too easy to be swayed to the promises. But remember that it is not for everyone. Easy is not always preferable. And when it comes to money, remember that the devil is in the details. Take the wiser step and consult a financial advisor or a mortgage professional first before you file an application.