Do not be discouraged just because you do not have any money for a down payment since most lenders have 100% financing programs available and they are not as hard to qualify for as you might think.
Remember, banks are in the business to make money – if they don’t lend it, they can’t make it – so they have countless financing options available to ensure that just about everyone can get financing. The main caveat, as always, is that you have good credit. However, many lenders will still lend 100% of the purchase price to borrowers with less than perfect credit. The risk involved in doing this will be reflected in a slightly higher rate than someone who has excellent credit, but you are likely still better off then you would be renting.
When you apply for 100% financing you should decide whether you would like to get one mortgage or two. If you get one loan for the full amount you will likely have to pay for private mortgage insurance (PMI) which is charged anytime the loan amount is greater than 80% of the purchase price. Some lenders will pay the PMI for you and simply charge you a slightly higher interest rate for the use of the money.
The alternative is to simply apply for two loans – a first and a second mortgage simultaneously in order to accomplish the same goal (100% financing). This is typically done with an 80% first mortgage and a 20% second mortgage and can be done through the same lender or through separate lenders.
If you are unsure which route is better for you then ask your mortgage professional for the “blended” rate of a first and second mortgage and compare that to the rate being offered for just one loan. When you fill out the form on this website you will only need to pick your rate for the first mortgage and once your mortgage professional analyzes your particular situation they will let you know whether you are better off with one loan or two.
Please use the resources available on this website to help you make an informed decision and if you have any questions along the way make sure to use the “Ask An Expert” feature.
