Lenders offering no-money down mortgages

Borrowers must verify credit and demonstrate ability to pay

By Joseph Ditzler / The Bulletin / @josefditzler

First-time homebuyers and homeowners recovering from the housing crash may still qualify for a mortgage, according to local lenders.

The government is still in the business of helping people buy their own homes, which means programs still exist to help eligible buyers with little or no down payment or a recent history of foreclosure.

“Certainly the desire is there” on the part of prospective homebuyers, said Lynne McConnell, associate director of HomeSource, a homebuyer’s program run by NeighborImpact. We are definitely getting a ton of calls.”

Local lenders said they adhered to stricter lending requirements even before the federal Consumer Financial Protection Bureau imposed them in January. The new regulations do away with loans based on no verification of income, and cap the borrower’s debt-to-income ratio at 43 percent, among other measures. Borrowers need to demonstrate a good credit and employment history, as well.

“We would look at that and say, ‘That’s just common sense,’” said Russ Bernardo, real estate lending manager for Springfield-based Northwest Community Credit Union.

Northwest, which has branches in Bend and Redmond, offers a program called 100 Percent, in which qualified homebuyers may borrow with little or no down payment. The program is open to those looking for a single-family home in which to live, Bernardo said. He said the borrower’s ability to pay the monthly mortgage is a better indicator for the bank than the size of a down payment.

“We found that if the borrower truly had means to afford and make the payment, whether (the borrower had a) 20 percent or 0 percent down payment really didn’t sway whether we were going to take a loss on that or not,” he said.

At Bend-based Bank of the Cascades, a program called New Beginnings allows prospective homebuyers who experienced a recent foreclosure or short sale to qualify for a mortgage without waiting five to seven years to improve their credit scores, said Rockland Dunn, the bank’s Central Oregon regional manager for mortgages. Borrowers still must verify their credit and ability to pay, for example, but lenders have some flexibility to balance one factor against another.

“It may not work for everybody, but it will work for some,” he said.

State and federal programs also assist targeted groups, such as first-time or rural homebuyers and veterans, by insuring loans from commercial lenders.

However, borrowing with less than 20 percent down means paying mortgage insurance until the mortgage holder builds equity. A low down payment also means the borrower makes a larger monthly payment.

Nonetheless, the notion that mortgage loans are hard to find is mistaken, McConnell and Dunn agreed.

“Certainly there’s a lot of opportunity here again that might not have been here a couple years ago,” said McConnell, of NeighborImpact. “There are good opportunities if you can pull all the pieces together and make it work.”

— Reporter: 541-617-7815, jditzler@bendbulletin.com