Don’t want to make a down payment on your upcoming purchase of a house? That’s okay, and you might get a better deal out it.
Not every mortgage loan requires a down payment. The size of your down payment is completely up to you.
And, just because you opt for a no-down payment loan, it doesn’t mean you’ll pay higher costs as compared to everyone else. You’ll likely pay less.
There are two reasons why.
First, interest rates on 100% loans are often set below the market’s general interest rates for home loans; and, second, the costs of mortgage insurance are often reduced or removed completely.
Sounds strange, right? You wouldn’t think that a 100% mortgage costs less than a mortgage with a down payment — but it’s true.
And it’s because of the government.
Many years ago, through its various mortgage agencies, the government began making 100% mortgages available to specific groups of people, such as active military and veterans; and, owners of suburban and rural homes.
The key qualifier: no-down payment loans could only be used for main residences. Investment properties and rentals were not allowed. And, what the government found was that these 100% loans did pretty well, actually. They out-performed the loans made to the general population.
On that success, the programs multiplied.
Today, no-down-payment loans cover other groups of people such as doctors, educators, and first responders; and, people who buy and repair abandoned dilapidated homes.
They exist through the government and its agencies, and through lenders and local communities. Ask your lender about which programs might fit for you.
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Debt-to-income ratio is the basis and building block for almost every mortgage approval.