How To Finance Home Purchase With Zero Down Payment

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How To Finance Home Purchase With Zero Down Payment

This BLOG On How To Finance Home Purchase With Zero Down Payment Was Written By Michael Gracz of GCA Mortgage Group

It’s crazy to think that many Americans think home buyers need a 20% down payment to own a home. THAT IS A MYTH.

  • Of course, it does help to have 20% down
  • Home buyers will eliminate needing mortgage insurance
  • Eliminating private mortgage insurance will save homeowners money over the life of the loan
  • But how many Americans actually put down 20%?
  • Not many!

Down Payment By Home Buyers

It is estimated that 87% of home buyers use a mortgage to obtain the property.

  • So, remove the 13% who pay cash for their new homes, 60% of these Americans are first time home buyers, and put down an average of 6% or less
  • Let’s be honest even coming up with 3% to 5% can be hard at times
  • Rental payments may be higher than a mortgage payment
  • The problem many Americans face is saving for the initial down payment
  • This is a great opportunity to explore down payment assistance

Gustan Cho Associates participate in a down payment assistance program that helps many families make the American dream their reality!

Using Down Payment Assistance (DPA) For Home Purchase With Zero Down Payment

The CHENOA FUND is an amazing resource for potential homeowners.

  • The Chenoa fund’s mission is to assist credit-worthy families overcome the down payment barrier
  • Main hurdles to home ownership is the down payment
  • This down payment assistance program is something home buyers may want to look for

Let’s go over a few basics of this program.

Common Sense approach to underwriting. Let you know of fund follows HUD 4001.1 guidelines, but does have a credit score requirement of 620 or higher.

  • Must have a 620 + credit score
  • First time home buyers or repeat home buyers
  • No income or geographical restrictions
  • No equity share or recapture provisions

Chenoa Fund To Finance Home Purchase With Zero Down Payment

What is the maximum figure for down payment assistance?

The Chenoa fund will only contribute 3.5% of the purchase price. (We will go over the details later in this blog)

  • 115% or less of the areas’ median income = The down payment assistance can be forgivable
  • 115% or less of the areas’ median income = The down payment assistance will be paid back through a monthly payment

The Chenoa fund is helping underserved markets.

  • Millennials
  • Minorities
  • Lower income areas

Income Guidelines With Chenoa Funds

What is the average median income in my area?

Please visit HUD’ WEBSITE to look up specific County.

  • Once you know your median family income for the county, multiply that number by 115%
  • Let’s go over an example for LOS ANGELES County in California
  • The median family income is $69,300, $69,300 * 115% = $79,695
  • At this point if your family makes less than $79,695 annually, you would qualify for the Chenoa Fund DPA Edge program
  • This is when the down payment assistance comes in the form of a gift
  • Soft/Forgivable Secondary Financing, or Repayable Secondary Financing
  • Homeowners may not be required to pay it back.

If your family makes more than $79,695, the down payment assistance will be paid back in the form of 10 Year Repayable Secondary Financing at a fixed rate.

Please reach out to Mike Gracz of Gustan Cho  Associates for updated interest rates. Borrowers can call me directly on 630-659-7644 or send me an email on mgracz@gustancho.com. I can also answer any questions you may have with this program. This is still an amazing program, offering you the ability of 100% mortgage financing.

Closing Costs On Home Purchase With Chenoa Fund

How much will you need for closing costs?

Closing cost will vary from lender to lender.

  • Since the Chenoa Fund uses FHA financing, the seller can contribute up to 6% of the purchase price to pay closing costs
  • This is something you would want to talk to the realtor about
  • You may be able to get a home with little to nothing out of pocket
  • The Chenoa fund does take a common sense approach to underwriting

Mortgage Guidelines For Chenoa Fund

What are some other important guidelines to use this program?

  • Non- occupant co-borrower hours are only allowed for families under the median income requirements
  • Borrower may receive a refund of documented earnest money and other third-party fees
  • Manual underwriting allowed!
  • May be used for single-family or two-unit properties
  • Loan amounts will follow FHA loan limits
  • Gift funds are allowed in accordance to HUD 4001.1 Handbook
  • Chenoa Fund Programs not available in IL, MA, NY, SD, or WV

After reading this if you feel you may be a good fit for this program please reach out to Gustan Cho Associates. we will do all of the pre-approval work up front, and issue a full loan commitment signed off by a certified FHA underwriter. You will be able to use our TBD UNDERWRITING PROCESS. Your realtor will love you for it! Take advantage of this fixed rate mortgage product that could slingshot the success of your mortgage goals. we hope to hear from you soon

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