Zero Down
A zero down loan is good when you don't have enough cash to pay your closing costs and make a down payment on the purchase of your home. It is also used to avoid paying Private Mortgage Insurance (PMI) costs. Although most lenders have stopped offering 100% Financing there are still a few around that will. You must have great credit and in most cases be able to show your income. There are a couple of lenders that will still state income for self employed borrowers but not for borrowers that are W-2'd.
Zero down programs allow you to buy your home now, instead of waiting to save enough for a down payment.
There are several options available for buying a home with zero down.
- Get one new loan at 100 percent loan-to-value (LTV). PMI is usually required, and the insurance charges are not tax deductible.
- Get an 80 percent first loan and a 20 second (piggy-back or 80/20) loan. This program does not require PMI, and all interest is tax deductible.
- Get a new first loan and have the seller carry back a second loan for the balance of the purchase price.
Some zero down programs allow you to borrow 3 to 7 percent of the purchase price to pay your closing costs. Ask your loan officer if you qualify for any of these programs.
PMI is an additional charge you pay if you make less than a 20 percent down payment. This insurance policy protects the lender in the event of a payment default or foreclosure, and the loan is not paid off in full. The PMI payment ranges from 0.19 percent for a fixed rate loan with a 15 percent down payment; up to 1.09 percent with zero down; and as high as 1.34 percent on a zero down variable rate.
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