Buying a home with 100% financing is now an option for many people. Even people with less than stellar credit may qualify for 100% financing.
Loans of this type are typically split into two different loans – the first loan being the first 80% and the second loan for the final 20%. Two loans are used to avoid private mortgage insurance (PMI) charges. The rate on the final 20% loan is usually higher.
1. Different kinds of 100% financing
You may be able to get an interest-only loan as part of your financing to minimize your payments. These types of “interest-only” option can last for several years, with some loans now offering 10 years of interest-only payments.
There is also the regular loan that you pay down over time. Make sure you understand your loan options. 100% financing refers to the level of financing you are getting, not the loan type (regular, interest-only, etc.) you are getting.
2. Getting help with closing costs
Many lenders allow part of the purchase price to be used to defray closing costs. The amount of allowed closing costs that a loan will cover, if this option is allowed, is usually less than 6% of the purchase price of the loan. This allows many of your closing costs to be added into the loan, so you don’t have to pay them out of pocket. These closing costs may include loan fees, title charges, escrow charges, etc. Because the seller is allowing part of their selling price to be used to cover your closing costs, this is something that usually needs to be part of the purchase contract.
They may choose to increase the sales price by the amount the closing costs they are offering to cover. For example, a $400,000 house may be sold for $405,000 with a $5,000 credit for closing costs. Check to see if this is an option where you are. Some lenders have restrictions on the types of closing costs they cover.
3. Out of pocket costs
There may be some costs you need to cover out of pocket when purchasing a property. This can include an appraisal of the property, which can range to $300 or more. The same goes for pest inspection.
4. Refinancing tips
Once you own the house you may want to consider refinancing in the future. You usually have to wait 6 months to a year to cash out any equity gains you have in your home. Also check to see if your current loan has a prepayment penalty, as this may factor into your planning. If your prepayment penalty is for a year, then you may want to consider waiting to refinance after a year so you don’t incur a prepayment penalty.
About The Author
This article is from the http://www.archerpacific.com Loan Library. We have a large number of articles and quick tips to help you refinance, consolidate debt, shop for a mortgage, or anything else mortgage related.
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