Sure, Fannie and Freddie now allow LTVs as high as 97%, and the FHA only requires 3.5% down, but why stop there?
Today, BBVA Compass announced the launch of its “Home Ownership Made Easier” (HOME) loan program, which allows borrowers to snag 100% financing on a home purchase.
The bank is offering the new product as part of its pledge to put $11 billion to work to help low- and moderate-income individuals realize the dream of homeownership.
In order to qualify, the applicant(s) on the loan cannot have an income that exceeds 80% of the HUD median income for the area in which they buy.
Assuming they fit within those limits, they can get a home with as little as $500 from their own funds.
For the record, the program is also available to borrowers with higher incomes if they finance properties in low- and moderate-income census tracts.
Aside from requiring nothing down to purchase a property, the HOME program also comes with a lender credit of up to $4,500 to cover closing costs such as the loan origination fee, underwriting and processing fees, and title reports, to name a few.
It can also be used to pay for the appraisal and credit report, though it cannot be used for discount points or escrow items such as insurance premiums and taxes.
However, the seller or another third party is permitted to pay for these items.
Just remember that a lender credit will lead to a higher mortgage rate…it’s not really free, just less out-of-pocket early on. In fact, it costs borrowers over the long run in interest.
BBVA Compass executive director of real estate lending Eduardo Castaneda noted in the press release that borrowers participating in the HOME program might enjoy monthly mortgage payments that are lower than their current rent payments.
And that would apparently prove their ability to make payments going forward, despite what some may call higher-risk lending.
Additionally, borrowers will have to complete a homebuyer education course if they wish to utilize the program, which has proven to lower default rates in at least some cases.
The HOME Mortgage is only offered in fixed-rate varieties, with 30-, 25-, 20-, 15-, and 10-year fixed mortgages available.
This will ensure that borrowers won’t face any surprises if mortgage rates climb in the future, which they’re sure to do.
More importantly, borrowers don’t have to deal with pesky private mortgage insurance when they go with the HOME program.
That can save $150 or so a month depending on the situation, which should help to keep monthly payments down.
If you’re not familiar with BBVA Compass, it’s the U.S.-based subsidiary of Spanish bank BBVA, which also happens to be the largest financial institution in Mexico.
Compass has 672 branches mostly in Sunbelt-states, including Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas.
Tip: For a limited time (until March 31st, 2015), first-time home buyers can also receive a 0.25% lender credit if they complete 15 minutes of online counseling. It’s unclear if this can be stacked with the lender credit offered via HOME.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
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