Buy a House with No Money Down

Buying a new home with no money down is easier than most people think. For years, mortgage experts and banks have stressed the importance of having a down payment.

Thus, many people assumed that buying a home was unattainable. This is quite the contrary. Many mortgage lenders offer a variety of home loans that do not require a down payment.

Typical Down Payment Amounts
Ideally, down payments are about 20% of the home price. However, mortgage companies are willing to accept 3% - 5%. Because the average person did not have a large cash savings, most people had to delay buying a home, in order to save enough money.

Due to rising home prices, the majority of new home buyers can no longer postpone buying a home. Besides, building a cash reserve of 3% of the home's price would take several years. Instead, mortgage companies have begun tapping into a new niche. This allows people with moderate incomes and first time buyers to purchase a home with no money down.

Buying a Home with 100% Financing
Prior to 100% financing, home mortgage companies would only finance 80% of a home's price. Thus, buyers had to either have the additional 20% on hand, or forgo buying the property. Because of 100% financing, many buyers are able to buy a home, and have the lender finance the entire price. This alleviates the need for a down payment.

Additionally, home buyers can take advantage of 103% and 107% financing. Ordinarily, the extra money is used to pay the closing costs. However, if funds are left over, the buyer can use the money for whatever purpose. This might include paying off debts or making home improvements.

Piggyback Mortgage Loans
Piggyback mortgage loans, also referred to as 80/20 home loans, are very similar to 100% financing loans. The only difference is that homebuyers choosing the 80/20 option obtain two loans. This includes a first mortgage for 80% of the home price, and a home equity loan or second mortgage for the outstanding 20%. Although piggyback loans offer 100% financing, buyers will need money for closing.

By : ABC Loan Guide