Guidelines For No Down Payment Mortgages

2007-03-08 10:33:40

( Financial )



No down payment mortgages are ideal for individuals who cannot afford to make a down payment of any amount, or can only pay a small amount as down payment towards purchasing a property. No down payment mortgages are also known as zero-down home financing schemes, or no-money down loans, which have become popular due to the increase in real estate prices.

The requirements for you to be able to apply for no down payment mortgages can vary with each mortgage lender; however, you can expect that these lenders will require your credit score to be of a certain level. Some lenders may also evaluate your job history and income, while others only require you to only provide information on your employment and salary. Most lenders will also make an assessment on the debts that you currently owe against your current gross salary, and will require the borrower to live in the home that is bought. You may also be asked to refrain from declaring bankruptcy within a certain number of years from closing a mortgage deal, and pay a certain percentage for closing costs.

Availing of a no down payment mortgage can be very beneficial, but you will be requested to pay a certain amount for mortgage payment insurance (PMI). The payment of PMI can be averted through the following methods:

Some lenders can offer you a piggyback loan. This method will allow you to obtain a first mortgage on the majority of the value of your home, and a second mortgage for the remaining balance of your loan. Any interest that is charged on your second mortgage can be deducted from the taxes you pay.

Another method is to pay the PMI, and request for a cancellation of your PMI once you have reached 20 to 22 percent equity on your mortgage.

As far as interest rates are concerned, you can choose between a fixed rate mortgages whose interest remains the same throughout the life of your mortgage, or an adjustable rate mortgage whose interest remains fixed for only a specified period after which, the interest rate increases.

It is important for you to consider the above factors before availing of a no down payment mortgage loans. Quicken loan specialists can advise you further regarding this type of loan.


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