The mortgage industry has worked diligently to find loan solutions for home buyers who wish to purchase a home without a down payment. The industry wants not only to increase home ownership in the U.S., but also target a growing untapped market of consumers who desire home loan solutions that require no down payment. This type of “zero down” mortgage is popularly known as 100% financing.
It is essential to understand that the term, “100% financing,” does not automatically signify higher interest rates. Actually, if your credit is good, you are eligible for equivalent rates that are applicable to most traditional mortgage loans.
Nonetheless, in order to obtain 100% financing with an interest rate that parallels a traditional loan rate, you must meet higher standards of credit worthiness. The standards for credit history have been set high by lenders because of greater risk on their part. Usually lenders want you to have a minimum 650 score on a scale range of 300 to 850, 850 being the best credit worthiness.
Also, many lenders due to the risk involved, require you to hold private mortgage insurance (PMI). Private mortgage insurance rates vary depending on the size of the mortgage loan. PMI should be maintained until home equity has increased to a certain level or until it can be verified that you can make payments in continual good standing.
However, if you like to avoid PMI altogether and still be eligible for 100% mortgage financing, an 80/20 loan is an alternative choice. An 80/20 mortgage allows you to receive two loans; the first one covers up to 80% of the home’s purchase cost, while the second loan works as a 20% down payment.
The 100% finance mortgage option is good for:
- First-time homebuyers
- New homebuyers with limited financial resources
If you meet any of the above criteria, 100% financing may be an option for you. This type of mortgage loan gives you flexibility of buying a home without need for immediate financing. You can get a quick rate for 100% financing and speak with a Mortgage Consultant to see if this is ideal for your specific needs.
