How Does a No-Down Payment Mortgage Work?
Basics Mortgage loans that require no cash up front are becoming more popular. The entire value of the real estate is financed through the loan and paid for over a designated period. Prospective home buyers with credit ratings over 600 are the most likely to be offered mortgages that do not require a down payment. People who use such mortgages are usually first-time buyers and have moderate or high incomes but not a lot of cash. Monthly Payments Home buyers who finance the total value of their real estate typically have higher monthly mortgage payments and are usually required to purchase a significant amount of private mortgage insurance, also known as PMI. Lenders tend to charge higher interest rates on mortgages without a down payment in order to protect themselves in case monthly payments cannot be met. Disadvantages Homeowners who do not make a down payment still need to pay all closing costs, including legal and real estate fees. Banks that deal with no-down payment mortgages usu
