Mortgage Lending Library
Zero Down loans
In the past, home buyers had to save up for a down payment before they even approached a lender for a new home loan. Even with the possibility of a second mortgage loan, many people still have to save thousands of dollars in order to buy their own home. This is not always practical. Most people who are saving up for a home are also renting an apartment, raising a family, and investing for their retirement. Saving of thousands of dollars is difficult. When interest rates are low and there is a buyer’s market, home buyers often want to capitalize on this without having to tap into their saving or liquidate their assets. Zero down loans can be the solution to this dilemma. Zero down loans finance every aspect of buying a home -- some even finance the closing costs. With zero down loans, home buyers can get a new home loan that covers the entire cost of buying a home. There is no need to save for the down payment. If you are currently renting an apartment, zero down loans can make the transition to homeownership simpler. You can simply start paying off your new home loan – sometimes, with payments comparable to rent. The main drawbacks with zero down loans have to do with equity. Zero down loans do not give you much equity, unless you are buying a property for less than it is worth. Secondly, since there is no equity in the home, some lenders and some sellers may be reluctant to enter into contracts with you when they find out that you are choosing zero down loans for your new home loan. To overcome this, it's a good idea to discuss zero down loans with the seller and with your lender. The lender can tell you whether zero down loans are for you. Discussing zero down loans and financing options with the seller can make the seller more comfortable about the contract. Frank discussion can show that you're serious about buying the property and have no intention of bowing out of the deal – no matter what decisions you make about financing.