The no money down mortgages are back, which are the same loans that put many homeowners into foreclosure not too long ago. According to Market Watch on Feb. 1, 2013, in lieu of a cash down payment, these mortgages are being offered to homebuyers with sizeable assets.
The banks offering these no money down mortgages claim they are safer than the ones handed out in previous years, which almost caused a foreclosure epidemic. Clients looking for the no cash down payment mortgage will often be required to have two forms of collateral to qualify.
Banks are looking for collateral of a house, along with a portion of the client’s portfolio. This means these mortgages will most likely be offered to the more affluent homebuyers, leaving the average folks scraping for that cash down payment.
According to Market Watch, the client who qualifies for the no money down mortgage will most likely have the money to use as a down payment, but instead of tying it up, it will be used as collateral. This will save the potential homeowner from taking money out of interest earning accounts.
With the interest rates on mortgages so low today, they may get this loan as low as 2.5% fix rate. Some clients see a bigger return than 2.5% on their investments, so this saves them money. This might not be the case with an adjustable rate mortgage because the interest rate can climb.
The no money down mortgage is nothing for the average family to get excited about, unless of course you have a sizable portfolio that can act as collateral for your mortgage. Since this is not something that many in the middle class may have today, the qualifications to get the 100% financing of a home seems to be an offer that would only benefit the rich.