It is possible to purchase a home with no money down at all. Keep reading to discover some low-down Payment home buying options, plus some high-down Payment home buying options. When you purchase a home without paying down any of your cash, you buy with a fully financed mortgage. A mortgage is a loan that you take out with a mortgage company or a bank. Here is some information about getting mortgage loans and mortgage credit scores.
There are many pros and cons to buying a house with no money down at all. If you qualify for financing, it is a fantastic way to have financing in a pinch. In the case of bad credit, you can use this as an opportunity to improve your credit score and therefore qualify for lower interest rates. Another pro to buying a house with no money down is the fact that you don’t have to worry about paying property taxes or homeowner’s insurance or maintenance. In most cases, these costs are added into the final price of the home. If you get a home loan, you will pay these things off very quickly.
You also have the option of buying a house with no money down and getting a mortgage that is a “standard” FHA home loan. This means that you won’t have to pay anything upfront. The down payment will be done at closing, and the loan will have a set term, usually 30 years, so you won’t have to pay it off for awhile. Even if you qualify for a conventional mortgage, you may want to consider an FHA home loan, as they have fewer terms and interest rates and are more competitive with all lenders.
If you don’t mind living in a small rural area and would prefer not to live near other single-family houses, buying a house with no money down in rural areas may be an option for you. There are several different types of rural homeownership loans, ranging from the traditional FHA loan to the non-FHA loan. Some rural areas may be too far away for most buyers to consider, but they’re available.
Perhaps the biggest consideration when buying a house with no money down is the pros and cons of the arrangement. One of the pros to getting a no-down payment mortgage is that you can save a lot of money in interest over the long-term. Another pro is that you won’t have to come up with the initial down payment. Most cons are related to how you’ll pay the payments, such as the interest rate, prepayment penalties or loan terms that aren’t as friendly to those with poor credit.
The pros to buying a house with no money down include the savings on interest, whether or not you’re buying a fixed or adjustable rate mortgage, and the flexibility of choosing either a short-term or a long-term mortgage. One of the pros to the fixed rate mortgage is that you’re locked into a rate for the life of the loan, so if rates go up, so does your payment. The cons to this are that it’s expensive to lock in a rate, and if rates drop lower than your credit score allows, you could end up with a deficiency. With the FHA home loan options, however, you get a more flexible payment plan. Also, both of these options have no prepayment penalty so you’ll have nothing to pay if you decide you don’t want the loan.
While buying a house with no money down can be a little bit easier, there are some major downsides. First, if you have bad credit or financial problems, then you may not qualify for the lower interest rates or flexible mortgage insurance options. Second, because the down payment is generally so low, there’s also a higher percentage of people with bad credit that qualify. Finally, since you won’t be able to do an actual home inspection, and only need a third-party company to complete the inspection and inventory, you’ll need to put down a fairly large down payment to qualify.
As you can see, buying a house with no money down can be a great option, depending on your circumstances. However, keep in mind that the down payment and monthly mortgage insurance premium are both very high, even when compared to traditional mortgages. If you can qualify for some type of loan, though, it will likely be much less expensive. In addition, with FHA home loans, most borrowers get a break on their closing costs, which means that they’ll pay less in overall mortgage interest over the life of the loan. Even if you have to spend a few months or years paying off your home loan, at least you’ll have a great home and be building equity, which can be very helpful in the future.