Eliminating the need for a down payment makes buying a home easier and lets the borrower keep more money to save or use for other purposes. However, the current mortgage industry and housing market situation has reduced the options for buying a home with zero down (also known as “100 percent financing”). Nonetheless, it remains possible for some types of borrowers.

As an indication of the zero down mortgage’s decreasing availability, the web site of Ameristar Mortgage Corporation has a notice stating that some of their loan programs have come to an end, and fewer types of no money down mortgages remain available. It attributes these changes to recent developments regarding Freddie Mac, Fannie Mae, and the mortgage insurers. Many banks have completely ceased this type of lending; for example, Reuters reported in March 2007 that Countrywide had stopped supplying “no money down” loans to any of their new borrowers.

Wells Fargo Home Mortgage continues to maintain a web page for mortgage offerings with little or no downpayment, but currently it only lists loans insured by the Department of Veterans Affairs as an option for buying with a zero down mortgage. A few lenders are still offering “80-20″ mortgages, also known as “tandem” or “piggyback” loans. This strategy combines two separate mortgages (one larger, the other smaller) to make home buying with zero down possible. Like other “no money down” mortgages, these loans have become difficult to obtain.

An alternative option is to acquire downpayment assistance from a local organization or government agency which offers this service. Some of these programs supply a single lump sum grant for use as a downpayment; others provide borrowers with low or zero interest loans to pay for their down payments. However, the availability of these programs may also decrease. The AmeriDream Down Payment Assistance Program recently issued a press release criticizing legislation that puts new restrictions upon such assistance; the law will take effect in October ‘08.

Basically, buying a home with zero down has become much harder than it was in the past. When a bank can be located that continues to offer such loans, it will most likely demand that the borrower have a very good credit record and stable income. It should also be kept in mind that closing costs and other initial expenses still must be paid when buying a home in this manner.