Zero down home financing helps you buy a house with little out
of pocket expense. Instead of depositing $60,000 to $20,000 to
get in your home, the most you will pay are closing costs of a
few thousands. No money down can also help you buy a vacation
home without completely depleting your investments.
When To Pick A No Money Down Mortgage
A no money down mortgage is a viable option for many people. For
one, you can get into a house for about the cost of rent. You
can hold onto your cash for moving expenses rather than a large
down payment. For those looking to buy a vacation home, zero
down helps you keep your assets liquid, not needlessly tying
them up in a property.
Choosing Your Zero Down Mortgage Loan
Zero down mortgage loans come with two different terms. The most
common zero down mortgage finances just 100% of the home's
price. All closing costs and application fees are still required.
The other zero down mortgage includes fees with the loan up to
3% or 5%. Since the principal is over the home's value, these
types of loans are harder to qualify for. In most cases, you
need an excellent credit score and cash reserves.
Skipping PMI With No Money Down
One of the hurdles of a no money down home loan is the
additional cost of private mortgage insurance (PMI). Most
conventional loans require you to carry this insurance until you
reach 20% equity either through appreciation or payments on the
loan's principal.
You can avoid this expense by piggy backing your loans. By
taking out two mortgages, one for 80% and the other for 20%, you
don't have to pay premiums. The same lender can carry both
loans, or you can choose different lenders.
Finding The Right Lender
To find a lender who offers zero down financing, start by asking
for loan quotes for no money down mortgages. With most online
sites, you will get a response in minutes on rates and terms. If
you have trouble qualifying with a conventional lender, turn to
a subprime lender. They offer more creative terms.
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