100 Percent Mortgage: Your Key To Owning A New Home

2007-04-12 11:34:06

( Financial )



If you do not have the money to pay for the down payment on a house, a 100 percent mortgage may suit your needs. But even if you have the money, you may want to keep it as an emergency fund or to purchase a high-yielding investment; then a 100 percent mortgage will enable this convenience. Although you no longer pay for down payments, note that lenders still require you to pay the closing costs.

To qualify for 100 percent mortgage, you generally must have a sterling credit. However, due to competition in the mortgage market, you may be able to find lenders that offer 100 percent mortgage to those who do not possess a perfect credit. You must not have filed a bankruptcy proceedings or foreclosure within a number of years prior to applying for a 100 percent mortgage. And you must ensure that the property you want to purchase must be owner-occupied, and not an investment property.

A 100 percent mortgage is not for everyone, though. Just like any financing that offers high loan to value ratio, taking out a 100 percent mortgage means that you will be paying high, not zero percent interest rates. Lenders may require a private mortgage insurance to protect them from the risk of non-payment. This will only apply until you accumulate at least twenty percent of equity in the property, or you can prove to your lender that you're a good payer.

And it may take some time before you can access the equity, which means that if you live in the house for just a couple of years, you may not be able to sell your home without incurring money for the closing. The worst scenario would be when the real estate prices decline; you may be left with a loan that is greater than the value of your home.


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