Mortgage Loans: Down Payments Are Not Always A Must

Article by Melissa Kellett

Sometimes due to not having all the money needed to make a down payment, you may loose the opportunity to buy the home of your dreams. It doesn’t make any sense to resort to personal loans in order to make a down payment and such behavior may prevent you from getting approved for a home loan. Fortunately, there are some loan lenders willing to finance 100% of the property’s value.

Putting money down is required when applying for home loan with most of the traditional lenders. However, since the loan industry has become increasingly competitive, full financing is no longer a rare privilege for those with excellent credit. There are many online mortgage loan lenders willing to approve your loan for the amount you need to purchase a home without requesting that you put money down.

Down Payment’s Purpose

You may wonder what’s the purpose of putting money down or what does it imply for the lender. The answer to that is simple: A down payment shows that the borrower has been able to save enough money to pay for a certain percentage of the home value and thus, chances are that he will be able to meet the loan’s monthly payments. If his income allowed him to save sufficient cash for a down payment, it will also allow him to pay for the loan’s monthly installments.

Down payment reduces the risk implied for the lender in the mortgage loan transaction and as in any other financial transaction, less risk means more possibilities of approval, less chances of default, and a lower interest rate charged for the money to be lent. In any case, being able to offer a down payment grants benefits to both parties.

100% Financing

Financing 100% of the property’s value implies that no down payments will have to be made. Getting approved for a mortgage loan of this kind is obviously not as easy as getting approved for a mortgage loan that finances 75%, 80% or 90% of the home’s value. However, as stated above, due to the highly competitive nature of the financial industry, more and more lenders are offering these loans and requirements tend to ease.

Nevertheless, 100% financing does not imply that there will be no costs at all. Most home loan lenders charge closing costs, legal fees, and other fees and costs for granting mortgage loans and thus, you’ll have to raise some money in order to be able to purchase the property. If you also need to make improvements to the property before moving in, then 100% financing may not be enough.

135% Financing?

You may have heard that there are lenders offering 135% financing. The number may sound strange, but what this number means is that the lender will grant you a loan for the property’s value and a 35% more. The lender does this knowing that with time, the property will increase its value and that your continued monthly payments will reduce the debt leaving the rest of the loan fully protected by the property used as collateral.

About the Author

Melissa Kellett is an expert loan consultant who can help you get approved for Bad Credit Debt Consolidation and Unemployed Unsecured Loans. Just visit where you’ll find all the information you need.

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