Question: I very much enjoyed last week's column on 103 percent financing and I'm wondering if this is my ticket to home ownership. Here's my situation. I went through a nasty divorce and had to file for bankruptcy in 2000. I make a good six figure salary so I think I will be able to afford a mortgage. I'm looking for a zero down loan because I don't have any significant savings. Is this program right for me?

Answer: As I wrote last week, the 103 percent mortgage allows qualified borrowers to finance the entire purchase price and closing costs, allowing them to buy a home with zero out-of-pocket cash. Unfortunately, the credit history must be excellent so a bankruptcy that's two years old will prevent you from qualifying.

But let's talk a bit about your situation and evaluate whether or not this is the right time for you to buy a house. Unlike many of the financial gurus out there, I don't necessarily endorse the "it's never too soon to own a house" strategy.

Your divorce undoubtedly ate up all of your assets, which is why you had to file for bankruptcy. From a lender's point of view, your credit must be re-established and your financial position must be strong. The lender wants to see that there is a very low chance of you defaulting on the mortgage. This takes time. In order for you to qualify for "A" credit mortgage rates, you must have strong credit scores and a proven savings history.

A credit score is a comprehensive evaluation of your credit history. It takes into consideration, among other things, your payment history, the amount of your extended credit, and how much debt you have. A score in excess of 700 is considered excellent. Anything over 680 is quite good. If you fall under 630 or so, you may have trouble qualifying for a conventional mortgage.

From my experience, your credit score will probably be a bit low due to the relatively recent bankruptcy.

The 103 percent mortgage I discussed last week isn't really designed for the folks who have no money. It's designed for people who have excellent credit and good savings that choose to pay a bit more in their interest rate in order to buy a house with no money down.

But back to your situation: You have a six figure salary - that's a minimum of $100,000 per year - not bad. Unless you go to one of these "alternative lending sources", ie. a loan shark, you probably will not be able to qualify for mortgage financing. There is almost always a loan out there for everyone, but be prepared to pay through the nose.

My advice is to wait a bit. Assuming you don't have extraordinary monthly obligations, it would probably be better to evaluate your personal budget and initiate a savings plan. Your good income should allow you to do this without sacrificing too much in the way of lifestyle.

Once you have a bit of money saved up, you have accomplished the first thing a lender likes to see - some money in the bank. And your credit scores will improve over time.

Once you have done this, consider a Federal Housing Administration (FHA) loan. FHA loans require only three percent down and have less stringent underwriting guidelines. But in the meantime, I would stress that you make up a monthly expense report. You'd be amazed at how much easier budgeting can be if you put it down on paper.

Published: March 27, 2002

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, the president of PMC Mortgage Corporation in Alexandria, VA, is a mortgage columnist whose work has appeared in numerous consumer, real estate, and mortgage publications. Mr. Savage welcomes your questions for possible use in this column, however because of the volume of mail received, Mr. Savage cannot answer questions individually.