One Hundred Percent Financing

Added March 12, 2004 by Ilyce R. Glink

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Summary: A lender offers a buyer a 100 percent mortgage but the buyer's agent is not enthusiastic. Sellers don't want to waste time with buyer who seemingly can't afford to buy the home, which is often assumed if they don't have cash for a down payment. An agent knows a 100 percent mortgage can be a tough sell but it's the agents job to convince the sellers that the buyers are legit.

Q: My wife and I began looking for a home. Through the course of becoming pre-approved, we were offered a 100 percent mortgage. This seems like a great option for us because we only have enough in savings to cover the closing costs.

When we mentioned this financing option to our real estate agent, she was very negative and stated that sellers do not respond well to them.

Can you tell us why she would respond this way?

A: Good question. Sellers don't want to waste time with buyers who seemingly can't afford to buy the home. And if a buyer doesn't have cash for a down payment, sellers often conclude that they won't qualify for financing either.

An agent knows a 100 percent mortgage can be a tough sell and this may be why your agent is so negative about it.

It's up to your agent, in my humble opinion, to convince the sellers and their agent that you are really guys are legit. One way to help her out is to apply for and get pre-approved for your 100 percent mortgage before you make an offer.

Once you've been approved, your lender will give you a commitment letter that states that you will get your mortgage provided the property appraises out in value.

Attaching a commitment letter and perhaps even $1,000 as a good faith deposit should strengthen your offer significantly, and make your agent feel a whole lot better about bringing that offer to the seller.

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