The fact is: zero down mortgage loans have been around for ages; but it was only these past few years when many financial institutions and lending establishments had began offering these on a full-time or whenever-applicable basis, as opposed to the last-resort basis of former years.
Apparently, there is an ever growing demand for zero down mortgage loans and for a very good reason too. There are many people, couples and families who would like to own houses, but cannot raise the needed 10% to 20% down payment for the transactions. Depending on the actual cost of the property, some people have to raise more or less $ 10,000 upfront before sealing any deal. Needless to say, that is a huge amount of money to dedicate to a not-yet obtained property. Sadly, that amount still does not cover other incidental expenses that should be paid for in full before a policy can be taken out.
But what exactly are zero down mortgage loans? As the name suggests this type of home financing debt offers no or zero down payment option. This loan is ideal for people who may not have around $ 10,000 jiggling in their pockets at the moment. Many first time homeowners are also choosing this option for the exact same reason; as with people who may be expecting a large windfall of cash sometime in the future. However, in order to compensate, the re-payment scheme entails the person to pay for closing costs at 2% to 5% of the property’s cost. The added cost can be included in the overall loan payment by which the new homeowner has to include in the monthly installment re-payment plan.
As such, the best financial institutions and lending establishments to ask zero down housing loans from are the ones that have long and verifiable history. Banks and other more known lending establishments offering FHA (Federal Housing Authority) loans would be a good place to start. The FHA is not a lending establishment per se, but they do allow other lenders, both private and commercial, to subsidize their loans under FHA approval. It would also be advisable to seek financial assistance from other government sponsored lenders like Freddie Mac and Fannie Mae. Private and online lenders like Lending Tree Mortgage Loans Company and Lower My Bills Company are also great lending establishments to ask assistance from.
As enticing as the zero down mortgage may sound, there are certain issues to consider, like:
1. There is always the closing cost that most people forget. Yes, the zero down home loan foregoes the down payment option, which then is included as part of the closing cost. This can make your overall loan increase by 102% to 105%.
2. There are also additional fees and costs to pay for like property inspection real estate appraisal, and settlement fees – all of which must be shouldered by the person asking for the loan.
3. And lastly, it is imperative that a private insurance is acquired after the loan is set. This is mandatory in most states, which also increases expenses considerably.