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.