Can I Find a Mortgage with Zero Down?

by Sherry Holetzky | More from this Blogger

07 Nov 2006 10:15 AM

The simple answer is yes. You can find mortgages with zero down, but it isn't quite that black and white. Not everyone can obtain such a mortgage, and it might not be as good a deal as it seems to be.

First, you generally must have very good credit and a stable, fairly high income to be considered for a zero down loan. Yet, even with good credit, you will likely end up paying a higher interest rate, often associated with people who have poor credit scores. The reason for this is that the loan will be considered a high risk for default if you don't make a down payment. Other costs include purchasing mortgage insurance besides homeowner's insurance.

If you feel you can't wait to buy, research local and federal financing programs for zero down buyers. If you belong to a credit union, you may also be able to obtain financing through it.

Another option you might consider is discussing owner financing with the seller. You may have to pay the full asking price for the property in order to obtain owner financing. Since you are coming to the table without money, you won't likely have much leverage in negotiating price. In fact, you may have to offer more than the asking price or offer to pay a higher interest rate, or both.

While the above options can be beneficial for some buyers, they aren't for everybody. A real estate investor may do well with a zero down loan, if the property will be sold quickly. This way, he or she doesn't have to tie up a lot of money in the property. However, for homebuyers, such options can prove very costly.

You may very well be better off waiting and saving for a down payment. It may be difficult to wait, but you stand to save a great deal of money over the long term.

Selling rather than buying? The following may be of interest:

Selling Your Home? Do the Work

Learn more about Sherry Holetzky

Sherry Holetzky is a work at home mom and freelance writer. Married to her best friend, Sherry and her husband are raising their family in a quiet rural setting in the beautiful Ozark Mountains.

View Full Profile | More from this Blogger