Some new homes boast low mortgage rates

You can learn about similar bond programs in your area through your county and state housing finance agencies.

These down-payment assistance programs can be used to purchase from any home seller. Builders have widely advertised these programs in areas where they are available.

Only options for zero-down payment loans

Dan Klinger, president of K. Hovnanian American Mortgage, the lending arm of builder K. Hovnanian, says government-sponsored programs such as Agriculture Department loans and down-payment assistance bond programs are the only options in the current market for someone who wants to purchase a home without a down payment.

Klinger says Hovnanian's lending division works with bond programs in various counties and states, including in Florida, Texas, Illinois and California.

No closing costs

You don't have to borrow from a builder's mortgage division or "preferred lender" to get the down-payment assistance, but you'll likely be told you have to do so if you want the builder to contribute to closing costs.

Klinger says about 85 percent of the buyers who finance through K. Hovnanian have some or all of their closing costs paid by the builder. Mortgage rules limit how much builders can contribute to closing costs. It varies from 3 percent to 9 percent of the home's value, depending on the down payment. FHA borrowers can receive up to 6 percent in incentives from the seller.

Be wary and compare

It can be convenient to borrow from the builder's preferred lender or its own lending division, especially when they offer closing cost incentives and help you navigate through these various down payment assistance programs, but you have to be wary, says Ed Conarchy of Cherry Creek Mortgage in Vernon Hills, Ill.

"The problem I see with getting financing through the builder is there is a conflict of interest," Conarchy says. "You have the homebuilder and the person approving the money under the same umbrella."

Oftentimes, the builder will offer incredible incentives, including no closing costs, but will compensate it by charging the borrower a higher interest rate, Conarchy says. Klinger disagrees. "That's a myth," he says. "Our rates are as good if not better. The only difference is speed and convenience."

It's crucial to always get a rate quote from an independent lender even if you plan to get the financing through the builder's lender, Conarchy says.

"Always compare and negotiate," he says.

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