No down payment mortgages, mortgage broker’s caution, are not for everyone, much as we’d prefer it if they were. Here’s the low down on this mortgage type.
What is a no down payment mortgage?
A no down payment mortgage, mortgage brokers explain, is one where no ‘deposit’ or payment on closing is necessary. In the United States, there are also some low down payment loan options available, where the amount required to be put down is way lower than in many conventional mortgage programs.
Why would a mortgage broker like this product?
It’s a good market for housing at the moment, but many first time home buyers are scared off by the incredibly hefty deposit they are required to fork out on the house. This is often about 20% of the final total payment, and is beyond all but the savviest of savers. This puts off even the most eager of potential home owners, as they feel it’s way beyond their grasp- most of us, mortgage brokers included, cannot afford to save that much up. However, there is a host of options available to you besides the conventional mortgage type which demands this of you- it’s just a matter of you knowing where to look.
Have you considered private mortgage insurance?
Private mortgage insurance allows home buyers to get mortgage approved with a lesser deposit, and can eventually be removed. It may be a better idea to look at this form of insurance- which you may be paying for less than five years- rather than wait around in a market where prices are climbing, caution mortgage brokers. Remember, in the end your monthly payments will be of more importance then that down payment, and whether you will have enough left to live on after paying your mortgage monthly. Putting yourself at risk by depleting savings accounts and life savings to make a large down payment can be incredibly risky, and you want to preferably avoid having most of your assets tied up in a house. This leaves you in the un-enviable situation of having a lot of wealth on paper and absolutely no leverage in real life. More details in this link: https://www.moneyadviceservice.org.uk/en/articles/mortgage-interest-rate-options
Can I get a no-down-payment mortgage?
There are no money down mortgage options out there. This is where a mortgage broker will come in handy, as they can guide you through all of your available options. You could also look out for the opportunity to use cash gifts as a down payment, although you will want to take precautions that you have proper, verifiable records of this gift if you do, particularly as loaners always want to be sure it really is a gift and not a disguised loan. Depending on your country, there may also be down payment assistance programs for you to take advantage of. In the US, there is also some home buyer grants you may be able to take advantage of it you plan properly.
The last piece of critical advice we have is to always apply for a home you can afford, legitimately. If you need to look for no down payment loan options, a good mortgage broker can help you.Read More