25 things vanishing in America, part 2: No-down-payment home loans

As the housing bubble inflated, you saw hundreds of programs about how to buy a house with 0% down. Don't expect to find that strategy will work for you today. While you may still find some foreclosure deals that allow 0% down if the bank wants to cut you a deal to get rid of its inventory, you won't find that type of deal on traditional resales. I have seen some builders offering no down payment deals, but they probably are paying significant fees to the bank or a private investor to get those deals for their customers.

No down payment homes always came with some stiff penalties, such as high closing costs and higher interest payments, so even in their heyday they didn't make sense for someone who was planning to stay in the house a long time. They did make sense for flippers who thought they could buy a house one day and flip it about a month or two later for significant gain. But those days are long gone.

The only exception to this were VA loans. But their 0% down payment was a benefit paid to veterans. Plus to get those loans one often had to jump through a lot of hoops and had to pick a property the VA would finance. Closing costs could also be higher, as could interest rates.

Today, I hear some large investment groups, called venture vultures by some, are swooping in to buy foreclosure properties in large lots, fixing them up cosmetically and selling them using private loans. If you can find one of these deals you might be able to buy a fixer upper with a 0% down, but you also may be stuck with a money pit that needs lots of serious work.

So if you do see a 0% down mortgage loan out there, tread carefully. Be sure you have the house inspected by a disinterested third party to know exactly what type of repairs you'll need to do before you can live in that home. Also, read the fine print on the loan carefully looking for things like prepayment penalties, exorbitant closing costs, and teaser interest rates.

Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask About Buying Foreclosures."

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