No Down Payment Mortgage: What You Need to Know

100% Mortgage Loans: What You Need to Know

Coming up with a 20% down payment can be a difficult task for many potential homebuyers. If you are in a similar situation there are a number of loan programs available to help you qualify for a mortgage. Here are several tips to help you decide if 100% mortgage financing is right for you.

Traditional mortgage lenders typically require a 20% down payment to approve your mortgage application. If you dont have the cash to make this down payment, there are a number of options available to you regardless of your credit score.

100% Mortgage Financing Basics

Mortgage lenders are constantly diversifying their loan offers to stay competitive. Many lenders offer 100% mortgage loans with interest rates comparable to traditional financing. These lenders may require you to purchase Private Mortgage Insurance to qualify for the loan. Private Mortgage Insurance is expensive and the drawback of this type of financing.

80/20 Mortgage Loans

An 80/20 mortgage loan is an affordable alternative to 100% mortgage loans that require Private Mortgage Insurance. 80/20 mortgages are actually two loans and are usually from two separate lenders. The first loan is for 80% of your purchase price and you will secure a second, "piggyback" loan for the remaining 20%. Expect the interest rate on the second loan to be slightly higher because this lender assumes more risk than the primary mortgage lender.

100% Mortgage Loans Come With Risks

There are risks when financing your home purchase with 100% mortgage loans. Because you do not have equity in your home, if the value of the property declines you could owe more than your home is worth. Also because you have two payments each month that are secured by your property, if you fall behind on your payments you risk losing your home.

You can learn more about your mortgage options, including costly mistakes to avoid by registering for a free mortgage tutorial.