Home loan question

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I've been schooled that you should always put down 20% on the purchase of a house. A friend of mine was telling me about these "custom home builders" that build you a brand new home with zero down. I just don't buy it. It goes against everything I've been told about home loans.

But I have to ask,what's the catch? Are these new custom home "deals" too good to be true? What could possibly be hidden in the fine print?
 
The home builders will get the purchase price of the home at the closing of the loan/mortgage. The lender sets the down payment requirements. You can put as little as 5% down on a conventional loan but you will need to pay private mortgage insurance or PMI.

Custom home builders won't start construction unless they have some money upfront which can be considered part of the down payment in the eyes of the lender via a construction loan. Sometimes the buyer owns the land outright and that can be considered part of the down payment as well. If the builder requires a construction loan from a bank then the builder gets the money in increments(draws) as the project is completed.

As far as best rates and fees go, putting 20% down will be the best route short of paying cash.
 
You can buy a home with little or zero down depending on your credit situation, but you'll be paying PMI. There used to be exceptions for vets. I'm not sure if that is still the case.

There are tons of materials for first time homebuyers to read, and many details that I don't have the time to type out. Do some research and read up.
 
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But I have to ask,what's the catch?


?

You are paying interest on 20% more than others.....

It is like "no payments until next Christmas" car loans; ya, no payments, but not 'no interest'
 
Just purchased a home with financing through a local well known bank. Only had to put down 15% in order to avoid PMI. No additional fees or charges to take advantage of this loan, and the rates were better than the major lenders.
 
NACA is superb if your are looking for NO down payment Below market 30 & 15 year fixed rate mortgage NO closing costs Unprecedented buy-down to virtually 0% NO points NO fees. They are for real. It may take a month or so longer than a bank and you will have to volunteer a few hours of your time helping out at their events. Their story is too long to tell here but check them out. IMO it is well worth your time. I hope they service your area.

NACA
 
Where are you going to live while you save the 20% down? If it takes 2-3 years of living in a crummy apartment, you'll be 2-3 years older when you finally pay off the house.

Just ask around. Asking doesn't cost anything. Also hold out hope that if the market in your area rises you'll have 20% equity before you pay 20% of your loan, and can shake PMI with a new appraisal or a refi.
 
Originally Posted By: ls973800
Just purchased a home with financing through a local well known bank. Only had to put down 15% in order to avoid PMI. No additional fees or charges to take advantage of this loan, and the rates were better than the major lenders.


They must not sell the loans in the secondary market and service them in house. I'm guessing the lender is Third Federal Savings and Loan.
 
NACA has a bad reputation as a scam. Some sellers won't do a deal that involve them. The ones that do are desperate and you're probably over paying.

In the old days, to avoid PMI, you'd get a 2nd mortgage for the difference, but those rates were slightly higher. When the mortgage market went down, all those lenders got wiped out so they sorta stopped doing them. Now you can find some that have started doing them again.
 
Wolf. Just wow. Wrong on every point you make but not going to argue further. If you want to be educated on them do some research.You do no one a favor by shooting from the hip. BTW they use two lenders. B of A and Chase to the tune of 18 Billion in committed funds.

No down payment
Below market 30 & 15 year fixed rate mortgage
No closing costs
Unprecedented buy-down to virtually 0% No points
No fees
No seconds
No splits
No gimmicks

Again it may take a few weeks longer to get approved (they are very busy)but once you get approved, most escrows are within standard /acceptable time..same as most banks
 
Originally Posted By: Wolf359
In the old days, to avoid PMI, you'd get a 2nd mortgage for the difference, but those rates were slightly higher. When the mortgage market went down, all those lenders got wiped out so they sorta stopped doing them. Now you can find some that have started doing them again.


Yes, they were referred to as Piggyback or split loans.
 
Originally Posted By: aquariuscsm
I've been schooled that you should always put down 20% on the purchase of a house. A friend of mine was telling me about these "custom home builders" that build you a brand new home with zero down. I just don't buy it. It goes against everything I've been told about home loans.

But I have to ask,what's the catch? Are these new custom home "deals" too good to be true? What could possibly be hidden in the fine print?


If you can put down less than 20% and still get the best interest rate and no PMI, then go for less than 20%. No rules, just various bank policies that are subject to change especially if they want to loan out more money.
 
Originally Posted By: tenderloin
Wolf. Just wow. Wrong on every point you make but not going to argue further. If you want to be educated on them do some research.You do no one a favor by shooting from the hip. BTW they use two lenders. B of A and Chase to the tune of 18 Billion in committed funds.

No down payment
Below market 30 & 15 year fixed rate mortgage
No closing costs
Unprecedented buy-down to virtually 0% No points
No fees
No seconds
No splits
No gimmicks

Again it may take a few weeks longer to get approved (they are very busy)but once you get approved, most escrows are within standard /acceptable time..same as most banks


I'm a real estate broker. I'm familiar with them. I don't know a seller who would accept a loan from them. I wouldn't have any seller go under agreement with them.

Just google NACA scam and it will tell you all you need to know. They're worse than FHA and I rarely do FHA.
 
Why wouldn't a seller do a deal with them? My kids and friends I know closed within 45 days. Google Bob is the Oil Guy or most any company or organization and you will find complaints. I hope you spend more research finding your clients good deals instead of just closing a deal fast to get a check
 
Originally Posted By: tenderloin
Broker? That says it all.


Well how about landlord/investor? And electrical engineer too.
 
Originally Posted By: Wolf359
Originally Posted By: tenderloin
Broker? That says it all.


Well how about landlord/investor? And electrical engineer too.


You know little/nothing about NACA first hand. Most complaints are from people who went to them to try and save their homes from foreclosure..most at the last moment NACA has helped thousands upon thousands. The OP was asking about home purchase, not saving desperate peoples home at the last moment.
 
Probably the lender is rolling all the fees into the interest rate or price of the property. There are some places that do that.
 
If you cant afford 20%, chances are you cant really afford the home, or will be stretched too thin to do other responsible financial things. Never one size fits all, but these classic rules of thumb exist for reasons...

Im sure the lender is making out and covering their risk one way or another...
 
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