“Buy with no credit!” shrieks the headline on the Web site. A photo of a sprawling house posted on the site bears the caption, “We secured this beauty for only $1 down!”
For $197, the site offers an e-book that will teach readers how to buy a house with no money down and no credit check. And there are other sites and salesmen with similar promises. Is it really possible to buy for no money down and no credit check?
According to industry experts, the answers are “yes” and “probably not.” Yes to the “no money down,” but as to the “no credit check,” they say it’s unlikely.
“Typically those who can qualify for 100 percent financing loans are very high-credit-scoring households,” said Doug Duncan, SVP of research and business development and chief economist for the Mortgage Bankers Association.
“You certainly can get a 100 percent loan-to-value loan, but you have to be a very high-wealth, high-income household with good credit,” Duncan said.
“I suppose if you were paying cash, you could buy with no money down and no credit. I’m trying to think of who would make you a loan with no credit check and no money down,” Duncan said. “One possibility might be if an individual gets a co-signer. You don’t have a credit history but a family member or someone who knows you might be willing to co-sign. That sounds like a stretch, though.”
No-money-down loans are not as unusual as one might think. American Advantage Mortgage Co., for example, offers a 100 percent financing loan.
“The benefits of these loans to high-worth individuals are that often their funds are tied up in investments and they don’t have to liquidate investments in order to fund a down payment,” explained Devon Callan, a loan officer with American Advantage. The loan does require a credit check.
Another no-down-payment loan on the market actually offers 103 percent loan-to-value, 100 percent financing and 3 percent for closing costs.
The loan was designed for the Northern California market and is offered by the Home Loan Group, a joint venture between Chase Home Finance, Chase‘s mortgage company, and Prudential Realty. The loan offers a fixed rate for an initial five, seven- or 10-year period based on prevailing interest rates. Then it rolls into an adjustable rate.
Desmond Smith, senior vice president of Chase Home Finance, emphasized that the loan does involve a credit check. “It’s a full documentation loan and obviously we will do a credit check,” Smith said.
The people most likely to obtain loans without down payments are either the very wealthy or the poor, Callan said.
“There are government programs designed to help low-income people buy homes that allow them to do so without a down payment,” Callan said.
“There are also government programs for people who don’t have conventional credit, through Fannie Mae, Freddie Mac, the FHA,” Callan said. “You demonstrate that you have paid your rent on time and meet other requirements.” While this approach isn’t traditional, it still is a credit check.
Callan said generally people should use their Realtors and brokers as primary sources of information on home-buying issues such as financing.
If this is the case, why pay for expensive e-books and seminars?
“I am not quite sure Realtors are experts in creative real estate technologies,” said T.C. Bradley, president of New Life Vision, a Cape Coral, Fla.-based online investment seminar company that promises to teach consumers how to buy with no down payment or credit check.
“Loan brokers certainly do have access to programs for the credit-challenged. There are quite a few that are very familiar with creative real estate technologies. But they are not in the business of teaching people how to structure a deal and get a homeowner to accept it,” said Bradley.
New Life Vision’s Web site offers $197 e-books on how to buy houses without a down payment or credit check. The 3-year-old company has been a member of the Better Business Bureau of West Florida since April 2004 and has a satisfactory record with the Bureau, with no customer complaints.
Asked if it is possible to buy a house with no money down and no credit check, Bradley said, “There are several forms of owner financing that allow you to do just that. Lease purchase, land contracts, to name a few that allow a person to have an ownership interest in a home without securing a conventional mortgage. To say that any of these methods require a credit check would not be true.”
Callan said, “Lease purchase means a renter being able to buy via rent payments, which is unlikely. Other than that, he’s talking about hard money financing, which means going to a private investor. It may be an option for some. However, it’s very expensive. Right now on a 30-year fixed (mortgage) you pay around 5 percent. With a hard-money investor, it might be 8 or 9 percent.”
According to Duncan, “The market is endlessly creative and that is a good thing. It is also, therefore, incumbent on consumers and investors to do their homework and have a clear understanding of the characteristics of the obligations they take on.”
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