Well folks, I always like to report on the more interesting mortgage programs that come across my desk. Most people know that there are 100 percent mortgage programs available. Actually, there are dozens of them and they have two things in common: first, you need to have near perfect credit and second, you need to have some cash reserves after settlement. Unfortunately, these two requirements make a lot of folks ineligible for 100 percent mortgage loans.

When you think about it, it makes sense. A loan with no money down carries an inherent risk. Since there's no down payment, the collateral that secures the loan isn't worth any more than the loan itself. Moreover, the borrower doesn't sink any of his hard-earned cash into the deal, so there's less incentive to prevent losing the house through foreclosure. So you can see why lenders require borrowers who want no-money-down loans to be crystal clean.

However, there's a new loan on the horizon offered by the Federal Home Loan Mortgage Corporation, also know as Freddie Mac. Through various lenders and brokers around the country, Freddie is offering a 100 percent mortgage program to folks who have a credit score as low as 620.

A credit score is a comprehensive evaluation of a person's credit rating. The higher the score, the better the credit risk. A score of 620 is considered not very good. Other 100 percent mortgage programs require a much higher score.

Let me share a few more things about the program:

• The rate is competitive. Figure on paying only about 1/8th percent higher than loans that require a five percent down payment;
• Cash reserves are not required;
• The seller can contribute up to six percent of the purchase price towards closing costs;
• Because this product is designed to help renters with a limited income reach their goal of home ownership, there are some maximum income limits. These limits can vary from region to region. Check with a local mortgage broker who's offering the program;
• Even if your credit score exceeds 620, the loan will not be approved if you have been more than 30 days late on any mortgage or rent payment in the last 12 months.

That's about it, folks. The bottom line here? It's very possible for you to buy a house even if you have no money and so-so credit. This should open the door of homeownership to some folks who previously thought they were stuck renting.

Published: May 22, 2002

Use of this article without permission is a violation of federal copyright laws.

, 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.