A house for no money down

Posted by Mike Belt April 1, 2009 at 1:08 p.m.

Yes, you can still buy a house for no money down. At least some people can.

Sound like a middle-of-the-night infomercial? It’s not.

At least two mortgage loan programs have money to loan without down payments. One is through the U.S. Department of Agriculture’s Rural Development program. The other is through the federal Department of Veterans Affairs.

Not everybody can get those loans. Income guidelines must be met, and the VA loans are for military veterans. The RD loans also are designed for people buying in a rural area, including towns of no more than 20,000 people.

Since the national downturn in the mortgage lending business began two years ago, interest in RD loans have steadily increased in Kansas. In 2005 there were $40.2 million in home loans in the state, according to the Kansas RD office in Manhattan. By 2008 that had increased to $118.5 million. Last year 1,444 loans were made.

“These are not subprime loans,” RD housing program director Tim Rogers said. “Our programs never did get into that.”

RD makes the money available to local lenders. There is no loan limit, but the amounts are determined by an income formula. Interest rates are negotiated between the borrower and the loaning entity. Most recently they were roughly about 5.5 percent on a 30-year, fixed-rate loan, Rogers said. The money comes from RD at no risk to the local lending institution.

“We fully expect the lender to give the borrower a discounted interest rate because we've taken the risk away," Rogers said.

In Douglas County last year only six RD loans were made. That isn’t necessarily surprising because most county residents live in Lawrence, a town of about 90,000 people, Rogers said.

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Godot (anonymous) says…

These "no skin in the game" loans are happening right now in Lawrence. I just saw a transaction go through where the sale price was listed as "x", but the seller paid all closing costs, and the buyer was able to borrow 100% of the so-called sales price. Buyer was able to get a mortgage with zero dollars out of pocket; the county will book the sale at the full sales price while not discounting the amount the seller paid in closing costs. The seller half-way loses (but is eternally grateful to be out from under the burden of owning property in Douglas County), the buyer wins, big time, and the county wins because the sale price was falsely inflated, thus justifying higher property taxes.

In the end, the real loser is the taxpayer, because the loan is guaranteed by the US taxpyer(i.e. sucker) and, because the buyer has no "skin in the game," he/she can walk away if the value of the house drops, leaving you/me, the taxpayer to pick up the tab.

Obamanomics is a wondrously insane phemomenon to behold.
April 1, 2009 at 10:29 p.m.