Buy A Home With No Cash Down
By Judy Feldman

(MONEY Magazine) – If you've enjoyed big stock gains in recent years and are in the market for a new home, you now have another way to use your portfolio to raise a down payment without having to sell stock. In March, Fidelity (800-544-6600) joined Merrill Lynch (800-854-7154) in offering brokerage customers mortgages that cover 100% of a home's purchase price. To qualify for the new Fidelity mortgage (from GMAC Mortgage), you must open a margin feature on your account and pledge as collateral an amount equal to at least twice the size of your down payment. To buy a house worth $200,000 with 10% down, for example, you'd need to keep assets worth at least $40,000 in your account. The interest rate on Fidelity's no-point, 30-year, fixed-rate mortgage is a competitive 7.25%. Merrill, which charges 7.5% interest and one point on its 30-year fixed-rate mortgage, requires you to have investments worth roughly 40% of the entire mortgage balance.

Brokerages aren't your only option if you're short on cash for a down payment. Three major lenders--Countrywide (800-570-9888), FT Mortgage (800-615-0822) and Bank of America Mortgage (888-815-2724)--have recently started offering 0%-down mortgages for moderate- and low-income borrowers. Interest rates can run as much as a quarter point above average.

Before you buy with no cash down, consider the risks. In the case of the Fidelity or Merrill pledged-asset mortgages: If the value of your holdings drops sharply, you might have to sell securities to come up with cash. And with any no- or low-down-payment mortgage: If real estate values plummet, you might not be able to sell your home for enough to pay off the mortgage.

--JUDY FELDMAN