Zero Down and No Payments for the First Year

Essentially, this builder (for two of their subdivisions) enables you to buy a home with nothing down and no payments for one year. Note that this program, like all offers,is subject to changeor cancelation without notice.

Key Bullets

• To buy a home under this program, you deposit earnest deposit with the builder, typically $5,000.  (I negotiated for my client a lower earnest deposit.) If you are financing 100% of the purchase price of the home, your earnest deposit is returned at closing. If not, the earnest deposit is applied towards the down payment of the home.
• The monthly payments are handled as follows: (I will use dates and amounts to simplify the example; your payment date and payment amount will be different.): 
  • You pay the monthly payment of (for example) $2,500 on the first of each month.  Before the next payment is due, you will receive a check from a third party for the full payment amount; in this example $2,500.  So, your cash out is only the “float” time between paying the first payment and receiving the reimbursement.  IT IS CRITICAL THAT YOU MAKE THE PAYMENTS ON TIME OR THE PROGRAM CAN BE TERMINATED.
  • At the end of six months, you then receive six months worth of in a lump sum and you use this to pay the next six payments.  At the end of one year, you continue to make your monthly payments. 

That's the basic program. The following summarizes the questions and answers I received from the builder’s representative and the mortgage company’s representative when I was digging into the details for my client:

Question: “This program seems too good to be true and generally, when things look too good, they aren’t real.”
Answer: “This is a real program, financed by the builder to sell homes.”

Question: “So essentially the builder is paying one year's house payments to this third party in advance as part of a home marketing program?”
Answer: “Yes.”

Question: “What are the tax implications from the payment reimbursement?  Will the buyer receive 1099’s and have the payment reimbursement money show up as income?”
Answer: “No. The money comes from a third party non-profit organization. There are no tax implications for the buyer. The buyer will not receive a 1099.”

Question: “What portion of the payment is covered: taxes, principal, interest, insurance, HOA fees?
Answer: “Taxes, principal and interest are covered. The one condition where the entire payment might not be covered [under this program] is if the client had a very low FICO score and their interest rate is exceptionally high. In that situation, not all of the payment might be covered. It is not a common situation.”
Question: “But a majority of the payment will still be covered even under this condition?” Answer: “Yes.”

Question: “What are the limitations of this program? Primary residence, secondary residence?”
Answer: “No limitations.”

Question: "Is there some special requirement for people to purchase a new home under this program?"
Answer: "A FICO score of 610 or above, the deposit money which will likely be refunded at closing if the buyer is financing 100% of the purchase price of the home and a reasonable ability to pay the mortgage after the first free year is past."
Question: "So this is not some sort of government program?"
Answer: "This is a promotional program paid for the builder; it has nothing to do with the government."

Want to find out more? call me for details.

Eric Fernwood
RE/MAX CENTRAL
8400 W. Sahara Ave
Las Vegas NV 89117
Cell: 702-358-8884
Eric@ISellLVHomes.com
www.EricFernwood.com

 

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