The Real Deal Miami

The return of “zero down” mortgages?

July 30, 2010 02:15PM

Legislation that would restore a Department of Agriculture homebuying program is headed to President Barack Obama’s desk for signature, one of the nation’s last sources of no money down financing for home loans, the Wall Street Journal reported. According to the National Association of Realtors, the legislation makes the department’s Single-Family Housing Guaranteed Loan Program self-sufficient. Borrowers will have to pay a higher “guarantee fee” of 3.5 percent, but the fee can be folded into the mortgage. Agriculture department loans were particularly popular this year as first-time homebuyers tapped the government’s federal homebuyer tax credit, which expires Sept. 30. Despite the last-minute save for borrowers in the program, industry watchers haven’t stopped criticizing these zero-down deals, given the role they played in the housing crash. But, the program is considered safer because up to 90 percent of the purchase amount is guaranteed, meaning the agency will pay if the borrower defaults. [WSJ]