103% Home Loans
LTV is a conventional fixed rate home loan where the monthly
payments remain the same over the life of the loan. Once
the mortgage is in effect, the interest rate does not fluctuate
but remains constant. Furthermore, the loan is 103% of the
sales price of the home. This allows for 3% of the loan
amount to be used towards the buyer's closing costs.
fixed rate loan is one of the most commonly used mortgages
for residential financing in America. The greatest advantage
for a home buyer is the predictability of the payments each
month because it never changes. This type of loan is often
recommended for home buyers living on a fixed income, a
set budget, or those planning on living in their home for
more than five years. If interest rates increase, the loan
rate will remain the same. Unfortunately should rates decline
below the set interest rate on the loan, the only way to
change it is to refinance the mortgage and incur a loss
of equity or additional closing costs to take advantage
of the lower interest rate.
key disadvantage of this type of loan is the high loan amount
in relation to the value of the home. Generally a home buyer
must occupy the home for at least three to five years before
he/she is able to cover normal selling costs should that
become necessary. Otherwise there may not be enough equity
to cover real estate commissions and typical seller costs
when the home is sold.
103% Home Loans
The following are highlights of this loan program:
Payment Requirements: No down payment required. The
loan amount is 100% of the lesser of the appraised value
or the sales price. Excess loan proceeds may be used towards
traditional closing costs, prepaid items, and consumer credit.
If the borrower elects to use the excess proceeds towards
consumer credit, revolving or installment debt may be paid
at closing to help the borrower qualify.
and employment: There are no limitations placed upon
income requirements. As for employment, there are no limitations
on a specific length of time at a particular job. However,
a 2 year history is required, preferably in the same line
of work (education can be counted towards this 2 year history
if it is for the same profession the borrower is currently
properties and occupancy requirements: Single family
attached and detached homes, 2 to 4 unit properties, planned
urban developments (PUDs), and Fannie Mae or Freddie Mac
approved condominiums. Investment properties are not allowed
with this program.
Costs: Closing costs and prepays may be paid by interested
parties (i.e. seller) as long as they are considered in
the contribution limitation. For primary and second homes,
the seller may contribute up to 3% of the sales price. Excess
loan proceeds may be used towards traditional closing costs,
prepaid items, and consumer credit. If the borrower elects
to use the excess proceeds towards consumer credit, revolving
or installment debt may be paid at closing to help the borrower
This type of loan is not assumable.
Penalties: Not applicable.
Reserves: The borrower is required to have a minimum
of two months cash reserves in the bank by the close of
escrow. Six months cash reserves may be required for borrowers
with less than a 680 credit score.
Funds: Not allowed
Scoring: Generally Fannie Mae and Freddie Mac require
a minimum credit score of 620 for owner occupied and second
(Non-Occupant Co-Borrowers): Not allowed.
Ratios: A borrower's total debt (proposed monthly payment
plus monthly payments towards credit cards, student loans,
car payments, and other installment and revolving credit)
cannot exceed 45% of their gross monthly income.
Insurance: Not required.