Housing Bubble 2.0: Michigan bank offers zero-down mortgage

Credit restrictions that were imposed soon after the collapse of the housing bubble about a decade ago have gradually been removed. You’re finding more and more financial institutions reducing standards, offering subprime borrowers more credit.

In other words, it’s 2006 all over again.

Case in point, a Michigan bank has brought back the zero-down mortgage, and will go as far as covering the closing costs. Yikes!

According to HousingWire, Flagstar Bank, a small savings bank based in the Great Lake State, is trying to help low-income homebuyers obtain the American Dream through a zero-down mortgage, the hallmark of the previous housing bubble.

As part of the new program, the bank will proffer the applicant the required three percent down payment. Borrowers are not required to pay back the down payment gift. Flagstar will also offer up to $3,500 for the closing costs.

More from the website:

The program is available to only certain low- to moderate-income borrowers and borrowers in low- to moderate-income areas throughout Michigan.

Borrowers would not have to repay the down payment or closing costs. But a 1099 form to report the income would be issued to the Internal Revenue Service by the bank. So the gifts could be taxable, depending on the borrower’s financial picture.

Flagstar said borrowers who might qualify for its new program typically would have an annual income in the range of $35,000 to $62,000. The sales price of the home — which must be in qualifying areas — would tend to be in the range of $80,000 to $175,000.


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