11/22/2022
If you've ever wondered about the possibility of getting full financing for a home, the answer is that it does exist.
Many people have the income necessary to pay a mortgage, but don't have savings for the down payment. Even so, in the United States you can get 100% of the value of the property and we tell you how.
What is known as a 100% loan-to-value mortgage?
In essence, we are talking about a mortgage loan that offers you the full amount you need to buy a new or used home. In other words, it is 100% LTV (loan-to-value) financing where you don't need to have the money for the usual down payment.
Prior to the 2008 mortgage crisis, there was greater availability of these products in the market. After this event, both banks and lenders were forced to tighten lending policies.
- Interest: From 4.75% to 5.75%
- Max term: 30 años
- Interest: Consult
- Max term: 30 años
- Interest: First years fixed-rate and the rest adjustable: SOFR + margin
- Max term: 30 años
- Interest: SOFR + margin
- Max term: 30 años
- Interest: From 5.125%
- Max term: 30 años
In order to protect the public and institutions, the relevant authorities demanded tighter controls. Beyond the requirements for this type of credit, comparing mortgage loans can lead you to the right choice.
In addition to conventional mortgages offered by various financial institutions, like Wells Fargo or TD Bank, you can also turn to government-backed programs, such as USDA or VA loans, which do not require any initial deposit.
What is required for a 100% LTV conventional mortgage?
The first thing to understand about this application is that lenders must do a thorough check on your personal finances.
To make sure you can afford the mortgage, they follow a strict protocol that evaluates your ability to repay under current conditions and in the event that rates increase.
Generally, financial institutions take your annual income and multiply it by 4-5 times to establish how much money they can give you.
For example, if you earn $35,000 a year, you could get anywhere from $140,000 to $175,000 to buy a house or apartment. In addition, these types of conventional mortgages require collateral, so there are 2 basic types:
Family deposit mortgage.
In this format, a family member who serves as a guarantor must pay 10-20% of the value of the property into a designated savings account. Since this is a security deposit, the guarantor will not be able to withdraw the money until the stipulated term has expired.
If you comply with the conditions and monthly payments, the money is returned to you. Otherwise, it will be used to assume the commitment.
Guarantor mortgage
Very similar to the previous one, you will need a family member to serve as guarantor for the bank or lender. In the event that you are unable to finish paying the mortgage and the property goes into foreclosure, the guarantor will be responsible for covering any losses.
This may mean the eventual foreclosure of your home to assume the costs, which is known as using property as collateral.
USDA Loans
This government program of the Department of Agriculture (USDA) allows people in rural areas to get a new or used property with no down payment. It is an initiative that began after World War II and has become popular because it has fairly flexible requirements.
To qualify for this alternative, you must meet the following:
- Purchase a home in the designated geographic boundaries. This program usually includes rural, suburban or outside the boundaries of metropolitan areas. Although the eligibility maps would be updated this year, you should review them to see if you meet this criterion.
- Do not exceed the maximum household income. This parameter varies by state and county, but includes all members currently living with you. The sum of what they earn cannot exceed the amount of government assistance.
VA Military Mortgages
If you are a veteran of the armed forces or are on active duty, you can apply for this government program.
Among its advantages, we highlight that you do not need to have a down payment, you do not need to contract PMI, it has a lower score requirement and the rates are among the lowest in the market.
Veterans must meet these eligibility criteria:
- 6 years in the Reserve or National Guard.
- 90 days or more of wartime service.
- 181 days or more of peacetime service.
- If you are no longer in service, you must have completed 24 months or the full time ordered.
In addition, those who have not had a dishonorable discharge, those who suffered a service-connected disability, and spouses of POW/MIA or KIA veterans who did not remarry are eligible to get a VA Home loan.
If you think a 100% loan-to-value mortgage is your best option, take a closer look at the implications. On Busconomico's comparator you can get these products and others with more attractive terms.
Español: Cómo obtener el 100% del valor con una hipoteca