Mortgage Loans Honolulu HI

Question: I am a single man who has been renting a house for the last eight years. I need to purchase something eventually because I know it's the smart thing to do. However, I really don't want to put any money down. I have about $50,000 but it's all tied up in the stock market and I don't want to liquidate any of my investments. What kind of no money down programs are available? I really don't want to pay an excessive interest rate.

Answer: Thanks to competition in the mortgage industry, there are some decent loan programs available that require no money down - and at decent rates.

If you are looking to buy a house with absolutely zero out-of-pocket cash, consider a 103 percent loan. 103 percent mortgage financing is available through various mortgage brokers around the country and allows the loan amount to exceed the purchase price by three percent in order to cover closing costs.

For example, if you were under contract to purchase a home for $180,000, the 103 percent program would allow you to borrow up to $185,400. This would give you $5,400 to cover points, closing costs and escrow deposits for taxes and insurance, enabling you to bring no money to settlement.

Let's talk about rates. A traditional 30 year fixed rate mortgage with 20 percent down may cost seven percent. Expect to pay about a half percent more for the 103 program - plus private mortgage insurance (PMI). (Private mortgage insurance is a monthly premium paid by the borrower if the loan amount exceeds 80 percent of the purchase price).

Let's translate this into dollars. The difference between seven percent and 7.50 percent on a loan amount of $180,000 is about $60 per month. Private mortgage insurance will add another one percent per year, or $150 per month.

So all in all, a 103 percent loan will cost you over $200 more per month simply because it's a 103 percent loan. Recognize that with 103 percent financing your loan will be much higher than if you put 20 percent down. The bottom line here is that the total payment on a 103 percent loan amount of $185,400 at 7.50 percent including PMI is about $1,450 per month.

If you put down 20 percent, your loan balance drops to $144,000, your rate drops to seven percent and the PMI is eliminated, making the monthly payment $958 - a difference of $492.

But with the 103 percent program you don't have to fork out $41,400 in cash at the settlement table.

There's never any right or wrong mortgage. A 103 percent mortgage program is great for folks who are unable or unwilling to put down a large down payment. Sure, you're going to pay a bit more in rate and PMI, but in many cases it's a modest price to get into a home without any cash outlay.

103 percent mortgage programs are also available as adjustable rates. For those folks who would like to have a lower initial rate, an ARM might be a good alternative. Figure on paying somewhere in the mid six percent range for a 103 percent loan that's fixed for ...