Zero Down Mortgage Loans

Obtaining a mortgage and owning a home is one of the most treasured dreams worldwide. Unfortunately, closing costs and down payments often make it difficult for many people to afford that dream. While it can be relatively easy to come up with the money for the monthly mortgage payment, especially if the mortgage payment is less than rental payments, saving a sufficient amount of money to make the down payment can be almost impossible. Sadly, far too many people are unaware that a few companies offer zero down mortgage loans for individuals who are simply unable to come up with enough money for a down payment and closing costs.

No money down mortgage loans are typically not widely advertised; which is one of the number one reasons why so many people continue paying rent month after month instead of pursing their dream of home ownership. It is possible, however; to find zero down mortgage loans and taking the time to locate such lenders is well worth the effort.

Prospective loan applicants should be aware that no money down mortgage loans do have a few special loan underwriting guidelines that may not be present on other types of loans. First, the lender is going to be financing 100% of the value of the mortgage. The lender is taking the risk that you won’t repay the loan. If you should default on the loan, the lender needs to be assured that they will be able to recoup the maximum amount of money they invested in the mortgage. In order to protect their assets, lenders who are willing to make zero down loans will require that you have a certain percentage of debt to income ratio. While this can sound confusing, it basically just means that your total amount of debt on other loans usually cannot exceed about 30% of your total income. The percentage of loan debt varies from one lender to another, but 30% is typically standard.

Secondly, the lender wants to be assured that the property they are allowing you to mortgage is worth the amount of money they are lending. Therefore, the appraised value of the home must be equal to at least the amount of money the lender is willing to loan. An appraisal will be performed on the home and if the property fails to be appraised at the selling price the loan will either be denied or you will be asked to re-negotiate the selling price with the current home owner.

Furthermore, the lender is going to require you to pay mortgage insurance until you have accumulated enough equity in your home. Mortgage insurance insures the lender against any losses incurred in case of loan default and foreclosure that are not recovered by the sale of the property.

While there are more regulations required to be approved for no money down mortgage loans, in the end they are an excellent way for individuals who are unable to come up with a down payment to be able to get into a home of their own.