First Time Homebuyer - 100% Mortgage Financing

1. One single loan up to 100% of the purchase price or appraised value (whichever is less). With this option, you typically have to pay PMI (private mortgage insurance). Depending upon your credit score and the PMI rate, this option may be less expensive than a combo loan that carries a higher rate second mortgage. Also, you may also be able to finance the PMI into your rate and still come out on top.
   
   Private Mortgage Insurance protects the lender’s investment in your home. If a lender is forced to foreclose on a property they typically get about 80% of the value after paying to sell the home, and often selling it at a discount in order regain their money quickly. PMI is an insurance policy that pays the lender the remainder of their investment, which is why they require it on any mortgage where they are loaning more than 80% of the value of the property.
   
2. 80/20 combo loans - If you go this route, you will obtain a first mortgage for 80% of the home’s value and a second mortgage for the remaining 20% of the home’s equity (often referred to as a “piggy back” loan). When second mortgage rates are low, this option is extremely popular because you avoid having to pay PMI. Be sure to ask your loan advisor about the various options for second mortgages. You should be able to choose between both fixed rate and adjustable rate options.

The Pros and Cons of 100% Mortgage Financing

1. These programs allow people to purchase homes and invest in real estate who do not have large cash reserves.
2. Homeowners enjoy potential tax advantages and have the ability to build equity by paying down the loan’s principal each month.
3. Homebuyers may possibly build equity simply by home prices increasing in their given markets.
4. Money may be freed up to invest elsewhere or be used for other expenses.
5. Allows people to pursue the dream of homeownership and helps strengthen communities.

1. Interest rates are typically higher than loans with 5-10% down.
2. If property values fall in an area, homeowners may end up owing more than their homes are worth.
3. PMI payments do not go toward paying down your principal.
4. Payments may change if a homebuyer selects an adjustable rate mortgage product - be sure to ask you loan advisor if the rates are fixed and for how long.
5. Balloon payments on some second mortgages may lead to a large lump sum being due at one time - make sure that you ask your loan officer if there are any balloon payments with your loans.

First Time Homebuyer No Money Down Mortgage Solutions