Zero Down
A zero down loan means that the bank is lending 100% of the purchase price. This lets you buy a home even if you don't have enough cash to make a down payment and pay the closing costs.
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 ratio (LTV). PMI is usually required, and the insurance charges are not tax deductible.
- Get an 80 percent first loan and a 20 percent 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 finance the balance ("take back a second mortgage" for the balance of the purchase price.
Some zero down programs allow you to borrow 3 to 7 percent more than the purchase price, in order 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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