A Home Inspector’s Weblog by Frank Schulte-Ladbeck

exploring homes and the lives in them around Houston

Zero Down Loans in the Current Market

I have been asked in this past week if zero down loans for mortgages are still available. Buyers are looking so closely at costs and their finances that they are looking for deals in many aspects of the home buying process.

I had one caller looking at how he could reduce my price, but there is only so much that I can do. I have seen clients looking at ways to have the price of a home come down, and I have been hired by a seller to inspect for items around the home which may cause the price to go down, so they can be taken care of before the sale. This trend of having a home inspection is increasing among sellers. Some buyers are going in with quite low offers thinking that the seller will simply accept these values. In Houston, this is not the case. I have seen some sellers price their homes below the appraised value to encourage the sale though.

Back to the initial question: can you find zero down loans? Yes, there are lenders who still will make this deal. A better question is do you want such a loan? When you come to the negotiating table with no money to cover the closing costs, or to pay part of the home on your own, the lender charges you more for such a convenience. This will mainly take the form of a higher interest rate. Over the course of a thirty year loan, even a 1% increase in the rate could cost you a great deal of money. I think that some consumers hide the cost of interest rates from themselves. A three hundred dollar television could cost you over four hundred dollars if you only make the minimum payments, and the same principle holds for your home loan.

If you are shopping for a home loan, I would strongly suggest that you have some money in the bank. (How about that tax rebate and your refund?) If you do find a zero down loan that suits you, then you still have the funds in the bank. However, you may find that the rebate/refund money could be a step toward home ownership, but you will need more than those funds to obtain the best deal.

The largest expense that you will have in your life will be your home purchase. You should absolutely look for the best deal, and you should make sure that you are not paying more than you are required, but do not skimp, because a major mistake could ensue. For example, if you do not have a home inspection or a WDI report (termite inspection), you could find out that you bought a house with a major problem. By not negotiating from a position of strength with your lender, you will find yourself paying more than you should.

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