What Does 100% Mortgage Financing Mean?
If you’re wondering what does 100% mortgage financing mean? Then know this is one of the easiest and best strategies in the real estate industry for generating profits, and you can do it too!
Real estate investing is loaded with acronyms and jargon that challenges new investors. On top of that, dozens of books, manuals and articles have been written about buying real estate with no money.
At some point, entrepreneurs dream of getting rich. Late night TV and the traveling hotel-to-hotel seminar businesses encourage all who listen to get rich quick with no money down.
I’m Ted Thomas, and I’ve been involved with real estate for decades. For the last 30 years, I’ve been involved with the sector of tax liens and tax deeds.
Today I’m going to answer your question, “What does 100% mortgage financing mean on a house?”
Want to learn how make big profits from bargain real estate? Would you like to buy mortgage-free homes for pennies on the dollar? Or earn double-digit interest rates? Learn how with this FREE mini class!
What Does 100% Mortgage Financing Mean?
No Money Down
Can you fully finance a house?
As amazing as it may appear, many property owners will actually sell – almost give away – a property just to get rid of the burden of maintenance, government registrations, unruly tenants, property taxes and the management of all of the above.
A zero down payment is not usual.
Many properties are overpriced and will be offered regularly with 100% mortgage financing, primarily because they cannot be sold as they are because they’re over-mortgaged, over-encumbered and in need of maintenance.
What Does 100% Mortgage Financing Mean?
Distressed Sellers
No money down means 100% mortgage financing on a loan to buy a house. I interpret that as the seller wants out. The seller must be desperate.
This happens all the time to buyers who purchase property without knowledge or a planned exit strategy. Sometimes buyers pay too much at an auction. Other times, they purchase from banks and spend more than the property is worth.
Unfortunately, sometimes the market changes, actually drops, and they discover they paid too much.
What Does 100% Mortgage Financing Mean?
Over-mortgaged Sellers
This happens when banks allow property owners to over-mortgage, which means the mortgage or the loan is in excess of the value.
Mortgages in excess of value happen in every recession, and it has nothing to do with the owner. The economy fails, prices fall and property is then worth less than the mortgage.
Sellers become desperate to sell. In most instances, the property value has dropped substantially. In 2006 to 2012, this happened to millions of properties across the United States.
What Does 100% Mortgage Financing Mean?
Defaulting on Mortgages
Keep in mind, the laws until recently stated in black and white that the borrower was responsible for the mortgage even after the foreclosure took place. That had been the law of the land for decades.
Recently, the President modified that law and allowed many owners to walk away and not pay their mortgage. This caused massive bank closures as they had no revenue.
Hundreds of banks nationwide closed their doors when the politicians changed the rule and allowed property owners to default with no consequences.
What Does 100% Mortgage Financing Mean?
Buying Someone Else’s Problem
My point is 100% mortgage financing home loans are usually a headache because the seller is traveling rapidly towards a foreclosure and possible bankruptcy.
The property may not sell because it’s over-mortgaged and over burdened with debt, and the seller is attempting to pass a problem on to a non-sophisticated buyer.
What Does 100% Mortgage Financing Mean?
Equity
An example of 100% mortgage financing that would be a good deal would be a property valued at $150,000 with a loan of only $100,000. The difference between the value and the loan is called equity.
I doubt that the seller is going to give you $50,000. However, they might allow you to buy the property for $150,000 and make payments to them as they pay their underlying loan.
What Does 100% Mortgage Financing Mean?
Credit
Good credit investors do buy from sellers and receive 100% mortgage financing for investment property. However, they have already determined a rental rate or income rate that will pay the burden on that property mortgage.
In other words, the seller is selling at 100% of value, and the seller owes substantially less. The seller will be earning interest on the full sales price and paying the mortgage at a much lesser rate.
What Does 100% Mortgage Financing Mean?
Commercial Real Estate
This is a common situation in major office buildings in your city. Those buildings may have multiple loans. However, the loans are much smaller than the value of the building.
In this case, the seller is willing to sell to an AAA credit buyer like another insurance company or an investment group because the buyer has substantial assets.
Therefore, the seller will be receiving money based on the selling price, and the seller’s loan payments would be substantially less than the selling price.
What Does 100% Mortgage Financing Mean?
Buyer Beware
What does 100% mortgage percent financing mean on a house? The simple answer is the buyer is not required to make a down payment.
The question the buyer should be asking is simply this, why is the seller allowing the property to be sold with no down payment?
What Does 100% Mortgage Financing Mean?
Money
If you are an AAA credit buyer like a mutual fund, bank or insurance company, you’ll have reserves in the event of economic changes, loss of tenants, or maintenance challenges.
Realistically, people who are attracted to 100% mortgage financing have very little money. If they have very little or no money, and there is a crisis, there will be a foreclosure, a non-payment.
If you are a buyer just getting started and have a dream of riches, and you have very little money, step #1 is to be cautious. This zero-down, 100% mortgage financing could be the elephant in the room, and you’ll have a great deal of challenge getting rid of the smell.
What Does 100% Mortgage Financing Mean?
Tax-defaulted Property
Here’s a solution. 30-years ago, I discovered tax lien and tax deed real estate. This market for tax defaulted property has grown. I quickly learned there are over 2 million properties that go through a tax auction process every year.
The system of selling these defaulted and sometimes used and abused properties has been executed and mandated by the government for 200 years.
By learning about tax liens and tax deeds, I opened the door for myself to purchase tax defaulted property for pennies on the dollar.
Learn how you can secure your financial future with this FREE mini class on bargain real estate investing. It’s a gift from me to you. Be sure to take advantage of it today!
What Does 100% Mortgage Financing Mean?
Risk
If you are an AAA buyer with millions in cash, the strategy is to purchase Class A properties full of Class A tenants. There is little or no risk because you have money and credit to handle financial challenges.
If you are a buyer just getting started, and you have a dream and no money, I’d suggest you be cautious.
If you are going to change the property in a way that will increase the revenue, for example, the current rent is $2,000 a month, and you decide it’s going to be an Airbnb with rental income of $6,000 a month, 100% mortgage financing may not be too scary.
The average zero down payment buyer has not figured out how to triple the income.
What Does 100% Mortgage Financing Mean?
Loan Payments
Creative people figure out many ways to make the payments.
The challenge with zero down payment is the payments are large because the loans are large.
The average newcomer is going to struggle with those loans unless they are changing the use of property.
What Does 100% Mortgage Financing Mean?
Financial Strategy
There are many other financial processes to study and many other financial articles on this site. Move ahead slowly and cautiously. Don’t be anxious.
Many others differ from my conservative strategies, and I’ll tell you why. It’s simple. Once you have a real estate crisis, it won’t end with everybody smiling.
Foreclosure is serious. Bankruptcy is even more serious, not today, but to your future of getting wealthy.
What Does 100% Mortgage Financing Mean?
A Success Story
I’ll close with a simple example of one of my successful tax deed auction buyers. Let’s call him Mr. B. He attended many of my 3-day workshops.
He started with very little money, and he turned that very little money into real wealth which will last him for the rest of his life.
He purchased more than 60 tax defaulted properties directly from the county governments using credit cards because credit cards are considered cash to the county auctioneer. Think about that, 100% mortgage financing on the purchase from the government.
What Does 100% Mortgage Financing Mean?
Installment Sales
The genius of Mr. B was he ultimately sold those properties with small down payments to buyers who had damaged credit and poor FICO scores. These were people the bank rejected.
Mr. B allowed small down payments, and he allowed extended installment sales.
The buyers just want peace of mind and a roof over their heads. However, the 60 properties with installment sales present a risk factor. Small down payments present a risk factor, and payments over 10 years (120 months) also present a risk factor.
What Does 100% Mortgage Financing Mean?
Title
Why did Mr. B take those risks? The answer is he never transferred the title or the deed to the buyers until they paid in full.
This is not a secret formula. It’s been going on for decades. You can do this. Hundreds of others have done it before you.
All of Mr. B’s ultimate buyers paid small down payments. His only qualification was they had good jobs and they paid him monthly.
What Does 100% Mortgage Financing Mean?
Conclusion
We hope you enjoyed Ted’s lesson, “What Does 100% Mortgage Financing Mean on a House?”
In the simplest terms, 100% mortgage financing means zero money down. You receive a loan with no down payment.
Buyers should be cautious when a homeowner offers financing with no down payment because the seller could be attempting to dump a property that has a serious problem attached to it. For example, the property could be over-mortgaged or in need of expensive repairs.
100% mortgage financing is not always a sign of a problem. However, if you’re an investor, receiving 100% mortgage financing doesn’t leave you with any real profit margin to work with, unless you’re creative enough to increase the revenue by changing the property’s use.
If you want to invest in real estate and have little money, rather than looking for no money down financing, an alternative option is purchasing tax delinquent property at county auctions, where the bidding starts around the amount of the unpaid property taxes.
At tax defaulted auctions, you can buy mortgage-free properties for 10, 20, or 30 cents on the dollar.
The enormous profit margin enables you to sell the property fast and generate quick cash flow. Because you bought the property at a huge discount, you can therefore sell it at a discount that attracts bargain hunters.
You also have the option of offering seller financing and requesting a small down payment and monthly installment payments to generate a passive income. Just be sure you keep the title in your name until the buyer has paid in full in order to mitigate risk.
If you’d like to learn more about how to profit from tax delinquent real estate, there’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.
Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.
Get started today at no cost with Ted’s FREE Master Class, that reveals the incredible opportunities available in tax defaulted real estate. The class is only about 1 hour of streaming video and contains life-changing information! You can’t afford to miss it!
Follow us on:
