No Money Down Mortgages in Martha's Vineyard

Victorian style homes in Oak Bluffs, Massachusetts on the Island of Martha's Vineyard.
Kenneth Wiedemann | E+ | Getty Images
Victorian style homes in Oak Bluffs, Massachusetts on the Island of Martha's Vineyard.

The zero down mortgage is back—in Martha's Vineyard.

Ira Stoll at the Future of Capitalism blog has come across an article on "Home Buying 101" in the spring of 2013 "Real Estate & Homes" supplement to the Vineyard Gazette. A local mortgage broker by the name of Polly K. Bassett is quoted as touting how.

Bassett, the "co-owner and a broker of Martha's Vineyard Mortgage Company, L.L.C., said: "We have access to a wide range of programs such as USDA, which is a program where you can put no money down, 100 percent financing, and we also do a 97 percent financing with three percent down....There are a lot of programs out there for people buying their first home."

Buy your first home on Martha's Vineyard with zero percent or three percent down? This might be a good idea for a borrower if prices go up, but it's not a good idea for a lender if the price goes down. "USDA" isn't explained in the article, but it might be a U.S. Department of Agriculture program for farm property, which means the lender is us, the taxpayers. And the Federal Housing Administration has a three-percent down program, which means, again, the taxpayers are on the hook.

I put in a call to the Martha's Vineyard Mortgage Company, where the phone was answered by Carol Borselle, Bassett's business partner.

Borselle told me that the USDA mentioned in the article is, in fact, the Department of Agriculture. It turns out that the entire island is designated as a rural area eligible for a USDA loan.

According to Zillow, the cheapest home in Martha's Vineyard is a two-bedroom condo listed at $260,000.

_By CNBC's John Carney. Follow him on Twitter at @carney.