For those in a tight financial situation and who need the money now, a 3 down mortgage may be the best option. But, of course, there are disadvantages. One is that it often puts a larger amount of money in the homeowner’s hands, then their home is actually worth. Also, by the time the homeowner is able to sell the home, they may only end up with the amount of the mortgage payment still owed on the home.
When homeowners to borrow against their homes’ equity, it means they are putting up their property as collateral. This means if they cannot pay their loan on time, the lender can foreclose on the house. If the house were to be sold at auction, the winning bid would take precedence over any other lien or liens on the property. So, how does this affect you? In most cases, the winning bidder will get the “hit” on your credit.
If your credit score is low, a 3 down mortgage might help you with financing, but it will leave a large scar on your credit report for seven years. In some cases, the credit may not be as damaging as one might think. In fact, many borrowers have gotten loans with a 3% interest rate or less. The difference between paying that high rate on a mortgage loan versus a loan with a lower rate is that the former is actually reducing your available credit while the latter is increasing it. Although your credit may not look as bad as it would if you went with a high interest rate on a mortgage, the negative impact on your credit is a very real thing.
You will also be required to purchase insurance on your home while you are paying your mortgage. This will cover the home in case of theft or damage from fire, smoke, hail, or weather. Even though you will be insured on your home, you will not be covered for any costs associated with the loan. If you should have to file a claim, you will have to pay for it out of pocket, which could make your home loan more expensive.
In addition, even though you can get a low interest rate on your home loan, this might increase the amount of money you will pay for your mortgage. Therefore, the interest rate on your loan will likely be higher than what you would pay if you were to get a conventional mortgage. It’s really up to you whether or not you want to go with a conventional mortgage or the lower interest rate and better payment that comes with a home loan.
One other thing that you will need to take into consideration when you get a 3 down mortgage is that you will likely be required to get a co-signor. A co-signer is someone who signs the mortgage for you in case you cannot pay off your payments. If you co-sign, the mortgage lender can disqualify that person from getting a mortgage if they are behind on their payments.
Although getting a mortgage with a 3 down payment can be good for you, it can also be a trap. You may find that the interest rate is very high on your new mortgage loan. If you don’t pay it off on time, you could end up paying more for your mortgage than you were originally given. This can be frustrating because you already had a bad credit rating and the loan you were being approved for was designed to fix your credit score.
In addition, you may find that your credit score isn’t that great when you get a down mortgage. If you plan on buying a home in the future, you will probably want to raise your credit score by paying off your mortgage early. If you can do that, you should have little difficulty getting another great mortgage offer in the future. Don’t let a down mortgage stop you from buying a house in the future.