No Down Payment Mortgage Program Helps You Own A Home

2007-03-08 10:33:40

( Financial )



You may want to buy a house but cannot come up with the down payment or you simply don’t want to spend your money for a down payment. Making a down payment is no longer a necessary requirement. Some government agencies and private lenders are now offering a no down payment mortgage program.

Government wants to provide each family a home through assisted low or no down payment mortgage plans to home buyers like you. The plans, however, impose ceilings on price of the house and loan amount, making them suitable only for low or moderately priced housing.

If the house that you want costs more than the ceiling in the no down payment mortgage program, you can seek accommodation with the private lenders.

One disadvantage in a no down payment mortgage is that you will be required to purchase private mortgage insurance. This assures protection to your lender in case you default. A standard loan, where you make a down payment of at least one-fifth of the home’s purchase price, does not require mortgage insurance.

Other mortgage lenders that finance a hundred percent of your home’s purchase price require that you put a certain amount of securities (certificate of deposits, stocks, bonds, or mutual funds) in escrow as mortgage payment protection. If you were to sell the securities to raise cash for a down payment, there would be capital gains tax to pay. By putting them in escrow, you avoid the tax while your lender gets mortgage payment protection.

Be aware that interest rate on no down payment mortgage is higher than a standard mortgage with a down payment. But if you calculate mortgage payments, you can still benefit more by purchasing your home now instead of waiting for enough savings to cover a down payment


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.