100% Financing with a Conventional Mortgage?

Question

Hey guys, I am working with a realtor in my area and I was talking to her about financing options for a purchase that I'm looking to close on in late summer.  I was talking to her about an FHA loan and then she expressed to me that she knew of a mortgage lender that does 100% financing and it is classified as a conventional loan, the only requirement is that I'd need a minimum of a 640 credit score to qualify.  Has anyone else heard of such a mortgage loan with a bank?  Seemed more like a private lender loan to me rather than a conventional loan through a bank.  We briefly spoke on the phone yesterday so I haven't been able to inquire on the subject with her in more detail, but I wanted to ask you guys and see what you thought about it as well.

Robert Ashline · Answer

Thank you Jake, I really appreciate your insight!  The reason it struck me as odd is because I had done a lot of research into it and everything seemed to suggest that only FHA, VA, or private loans that would do such a thing, and even FHA isn't 100% lol.  I'll definitely keep in touch with them about it and explore the options further.

Jake Roland · Answer

@Robert Ashline I just closed on a house with buyer clients that used a 100% financing conventional loan. It worked great for my buyers. The way their bank works is the 100% financing is only in specific areas that qualify for the loan program, and/or works with buyers under certain income limits. My buyers that used it also were in the income limits and so they got an extra $500 off of their closing costs, and also with this program all of the closing costs were less than a traditional mortgage which was great. Definitely explore the options, and if your loan officer is good they will explain the options well and you will be able to make an educated decision that works best for you!

Jake Roland · Answer

@Robert Ashline Yeah I thought the same thing. That is the first time I've actually seen it used, but it really worked great for them. And from my understanding if you do this you don't have the extra fees, closing costs, and qualifications that FHA and VA require. If you are putting improvements into the house then you can gain equity pretty quick even with the 100% financing.