Buying A Home with No Money Down Mortgage

There are many different types of loans, all with their own terms and restrictions.  If you are in the market to purchase a new home, but do not have the money saved for a down payment, there is a type of loan called a “no money down mortgage” that could be the answer that you have been looking for.

Typically, lenders require a down payment of 20% of the purchase price of the home; however with a no money down loan, you will be financing 100% of the price of the home.  The application process is very similar to a traditional loan; however it is important to be sure that your lender knows of your plans to finance the entire amount since they will need to check some financial criteria before approving the loan.  The specific guidelines and requirements will be discussed once you have started the loan process and are usually not addressed during the pre-approval period.

A no money down home is especially helpful for those who are looking to invest in real estate in an area where home prices are on the rise.  The sooner that the buyer can purchase the home, the more equity that they can build simply by owning the property.

Another reason why some will consider a no money down home loan is that the cost to buy a home is becoming higher and higher.  Moving expenses and closing costs can range from $5000.00 and up depending on your particular situation.  Many times, a no money down loan can help with these types of expenses.  Home improvements or simply paying down debt are also good reasons to try and be approved for this kind of loan.

Since you are not providing the lender with any money down, typically they will consider you to be a higher risk than some other buyers.  This will usually raise your interest rate somewhat and you will also need to purchase private mortgage insurance (PMI) both of which will make monthly payments higher.  It is wise to simply weigh the options on paper and see if a no money down loan will actually save you money or cost you money in the long run.