Even in a buyers market the prices of homes are higher than ever before. Because of this, many people cannot afford the down payment that is required of them by most convention home loans. For this reason, many lenders are offering zero down home loans. This is exciting for a lot of prospective home buyers that would love to own a home but simply do not have any money to put down on a home. Who wouldn't love to move into a home without paying anything?

What You Should Know About Zero Down Home Loans

When you start looking into zero down home loans you will find that there are a few different options for you to choose from. In some instances you may find 100% financing, which means that your loan is 100% financed and you do not have to make a down payment. This is a great deal for the person that is serious about owning a home but has no money in the bank. What you should be aware of when you accept this type of loan offer is that you will usually have a higher interest rate than you would of if you had put down even three percent of the purchase price. In addition, you should know that your monthly payments will be higher than they might have been not only because of the higher interest rate but due to the fact that no money was paid as a down payment, and therefore the entire amount of the loan is still being paid on. For many people being able to move in without paying anything is worth a slightly higher payment due to the higher interest rate and no down payment.

There are other ways to go about getting what are in essence zero down home loans. These loans are actually 97% financed and then other programs are used to help cover the three percent that is not accounted for by the lender. There are many programs out there for the low and middle income brackets that will help the borrower to pay their down payments as well as their closing costs on home loans. This will allow people to move into their home without spending a penny, even though they did not have 100% financing. The great thing about these programs is that many of them do not require the borrower to pay the funds back!

What you should know is that even when you get a true zero down home loan, which is also referred to as 100% financing, you may still have to pay something when you go to close on your loan. While you don't have to make a down payment on the loan you may still be responsible for closing costs. Closing costs can be in the thousands of dollars, so you need to ask about this and budget this because if you show up to the closing empty handed you will not get the keys and the deal will fall through. There are programs, as mentioned above, that will actually pay closing costs for qualified borrowers, so if you don't have the cash for the closing costs you'll want to look into these programs or see if you can get the seller of the property do contribute toward the closing costs to make them more affordable.

By : IC