Commonly known as 80/20 combo mortgages. 100% Financing can also be called also be acheived with 1 loan at 100%. Many lenders allow this now and it can even be done with less than perfect credit, although the interest rate will be reflective of your credit score.
With a 100% financing, a home buyer is able to minimize his or her out of pocket expenses. This allows more cash for the family to use for other home necessities.
For many years, the minimum down payment required was 5% of the purchase price for a home. Then, special first-time home buyer programs came into existence, which usually required a 3% down payment. Now you can buy a home without a down payment.
100% financing can be a great loan even for those who do have access to a down payment. Down payment funds can many times can be better kept aside for things such as other investment opportunities, a reserve account for emergencies and future home improvements.
100% financing does not include your closing costs. Your Real Estate Agent may write the closing costs into the contract for the seller to pay so that you may not be required to use any of your funds to purchase your home.
Writing closing costs into the Purchase and Sale contract is called adding "seller concessions". Many lenders will allow up to 6% of the sale price of the home to be paid in seller concessions.
100% Financing programs are offered by lenders in markets where property values are stable or increasing. In markets that show decreasing property values, lenders are much less likely to offer 100% Financing programs.
You will still have to put down earnest money on the home you plan to purchase. If you obtain 100% financing, the earnest money will be used toward your closing costs.
You might also ask our agent about companies that offer to have the PMI added to the interest rate where it is tax deductible, or have them do an 80/20 loan to avoid MI altogether.
Many people wait to receive income tax money, a big bonus at the end of the year, or a large gift from an immediate family member before they begin looking to buy a new home. A 100% zero down loan eliminates this waiting period and allows you to obtain the home you want now. Especially now with the uncertainty of interest rates and where they will be in the next 6-12 months.
Now is the time to begin looking for your dream home. Waiting may cause you to accept a higher interest rate because the rates have increased during the time you waited. Even if you do have money available for a down payment it is always a good idea to keep some money put away for a rainy day or for an old furnace that needs to be fixed, an old water heater that needs to be replaced or some other basic home repairs. Also, you may want to have some money left to help pay for some of the costs associated with buying a new home, such as buying window treatments, decorating, new furniture, etc...
