NO MONEY DOWN MORTGAGE

Up until about 20 years ago, the average down payment for a house was 20%. Now, it’s common for people to put down only 5%. New mortgage financing programs introduced by mortgage lenders even allow you to make no down payment on your new home purchase.

    Buying your first home can be an exciting time, and a step towards gaining equity in a home instead of losing money each month by paying rent. As a first time home buyer, as you look into options for buying, you may feel overwhelmed with the large variety of mortgage financing options available, and it's easy to wonder which is the best loan for you? Through our network of First-Time Home Buyer lenders, we can specifically design a custom mortgage financing quote to meet your special needs and goals.

    These programs are known as zero-down or no down payment mortgages. This means that you are financing 100% of the value of the home. Lenders introduced this type of mortgage financing because property values have historically risen, which helps homeowners create equity in their home. While no down payment mortgages can be a little more difficult for lenders, they are able to finance 100% of the purchase price. Lenders are now better able to review a client’s entire profile which helps ensure they are a safe risk.

    However, the disadvantage to a no down payment mortgage financing is paying private mortgage insurance, or PMI. Anyone who puts down less than 20% of the home’s value might pay PMI, depending on the financing program they choose. But there are ways to avoid this:

    • Some mortgage financing lenders are willing to give you what’s called a piggyback loan, or an 80/20 mortgage, to avoid PMI. Borrowers get a first mortgage for 80% of the value of the home, then a second mortgage (a home equity loan) for the remaining 20%, which avoids PMI. The value of this is the interest on the second mortgage is tax-deductible while PMI is not.

    • Borrowers that meet certain criteria can eliminate PMI after they’ve reached a predetermined level of equity in their home. This amount varies depending on the type of loan, but it is commonly between 20% to 22%.

    • Lenders are required by law to cancel PMI when the homeowner has reached 22% equity in their home if the loan was closed after July 29, 1999. However, once 20% equity is reached, the homeowner may make a request to their mortgage lender to cancel PMI. Otherwise, the homeowner may end up paying for PMI during the time it takes to reach 22% equity.

    To get started now and get approved for mortgage financing please click here and fill out our mortgage financing application form. This will take only a minute and our certified mortgage finanign specialist will contact you to discuss options available to you.

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