No Money Down!

by Darrin DeRoches February 23 - 29, 2012

I have always heard about these no money down deals and quite frankly they were either a scam or an advertising gimmick to get you in the door. This week I sold a property and took my client to a mortgage broker who provided us with a “no money down” mortgage with a reputable credit union.      Let me lay out the deal. My client has very good credit, a good job for the last two years and closing costs. He was considering on renting a property but asked me what I could do for him. He was looking to spend about $1,200 a month on a two bedroom property in the Burlington to Mississauga area. I took him to a mortgage broker who ran his credit and it turned out to be in the low 700’s, he makes about $46,000 a year and he only had $1,500 in savings and about $5,000 in RRSPs. The mortgage broker and I laid out two options. Save up the five percent down, about $10,000 and get a mortgage for around 3.29 percent or go with no the “no money down” mortgage at the 4.73%.      I began to show him condos in the Mississauga/Burlington area in the $190 grand area and he could get a one bedroom in a newer building or a one bed plus den in an older property. The kicker was the condo fees ran in the $400 to $500 dollars a month. He was approved for this level but he was concerned he would be house poor. I then sent him a listing in Hamilton for a small two bedroom house that was asking $195,000. He loved the pictures and we set up a showing for the next day. He brought his parents with him to view the property and within minutes they fell in love. We called the agent made an offer on the spot and bingo bongo we locked up the property and had it under contract for $184,000.     Since it happened so fast we had to meet the mortgage broker and find out his options since he was still saving up for the five percent down. The client decided to go with the zero percent down and the mortgage broker had it approved in less than 48 hours for a 4.73 percent, 30 year amortization. All he has to come up with is the closing costs which will run about $2,200 dollars. The mortgage works out to $932 a month plus taxes falls under his projected $1,200 a month plus no condo fees – a $500 dollar a month savings.     If he was to rent he would have provided first and last which would be $2,400 down, whereas he not only bought an $184,000 dollar home and he is using the $2,400 towards closing costs. The seller has the survey and first time buyer rebates on land transfer costs his closing costs will in the $1,500 range. Plus he stills has the RRSPs to play with – more info next week on that.     Moral of the story: if you have good credit, a good job and enough money for closing costs, call us and we will get the ball rolling!  V [DARRIN DEROCHES]