Fortunately, homebuyers do not need a large cash reserve in order to
purchase their dream house. Before mortgage lenders begun offering
different types of loan programs, those interested in buying a house would
have to save money for a down payment. This made it impracticable for
many people to purchase starter homes. However, buying a home with no
money down has become a common trend. Here are few tips to help you locate
a zero down home loan.
Types of Zero Down Home Loans
In addition to loans that make it promising for homebuyers to purchase
with zero down, there are also home loans that pay for all closing
fees. Thus, homebuyers are not obligated to pay out-of-pocket cash. This is
ideal for young couples or those with little cash on hand.
Zero down home loans are commonly termed 100% mortgage financing.
Traditionally, homebuyers would need about 20 percent of the home price to
qualify for a mortgage. Because of rising home prices and moderate
incomes, it has become difficult for normal hardworking individuals to build
a large savings.
There is also the option of buying private mortgage insurance. However,
if you want to avoid monthly PMI premiums, 100% financing is a better
alternative. 100% mortgage financing consist of buying a new home with
two mortgages. A first mortgage finances 80% of the home price, and a
second mortgage finances the remaining 20%.
Other Ways to Finance Mortgage with Zero Down
Zero down mortgage loans are available to people with good and bad
credit. Although these loans alleviate down payments, homebuyers are
responsible for paying closing fees. Closing fees vary. Typical fees are
about 3% – 5% of the loan amount. If homebuyers are unable to get their
hands on the cash, they may opt for a 103% mortgage financing loan. These
loans also offer 100% financing, plus addition money to pay closing
Finding a Lender for a Zero Down Home Loan
Try using one of ABC Loan Guide’s Recommended Zero Down Home Loan Lenders.
Various lenders offer zero down home loans. When shopping for a
mortgage you have two options: choosing a subprime lender or a prime lender.
Credit scores below 640 rarely get approved by prime lenders.
Nonetheless, subprime lenders offer mortgage loans to individuals with credit
scores as low as 500.