Over the last few years, several lenders rolled out zero down payment mortgages for home purchases, typically gifting borrowers the minimum 3% down payment that was required by Fannie Mae and Freddie Mac to approve the loan.
Those loan programs all but went away when the government-sponsored enterprises changed their rules to require borrowers to provide the 3% down payment themselves, effectively killing off the rise of zero down payment mortgages.
But now, zero down payment loans are back, but for real estate investors only.
Hard Money Sources, which connects borrowers and lenders in the private investment and hard money marketplace, announced this week that real estate investors can now get a loan to cover the entire value of their investment. That’s right; as much as 100% of the loan-to-value ratio.
“While most fix & flip rehabs are made by individuals that use their own capital, many individuals have expanded their rehab operations and need additional sources of capital,” the company said.
“Many successful investors with good credit often run into a cash crunch because their capital is tied into other projects,” the company added. “Hard Money Sources’ new lending program allows qualified borrowers to finance up to 100% of their real estate investment projects.”
According to the company’s website, the zero down payment hard money loan is actually a combination of two loans.
The first loan is a personal loan based on the borrower’s individual creditworthiness and covers the down payment itself.
The second loan is a traditional hard money loan that is backed by equity of the property being financed.
According to the company, the combined loans can range from $100,000 to as much as $1 million.
Borrowers must have a minimum FICO score of 680 and provide income verification to the lenders to be approved for the zero down payment loan.
According to Hard Money Sources, the most a borrower can “realistically expect” from a hard money lender is a loan that equals 90% LTV or 75% of the value of the house after repairs.
But with this program, investors can secure a personal loan of as much as $100,000 (apparently from SoFi), which they’d then use to cover the lender’s down payment requirement.
From there, the borrower can get their traditional hard money loan, and go on about their business.
Simple as that…