100% financing is a great option for borrowers, especially when buying your first home. However, as with any financial consideration, there are several pros and cons to consider before closing on a no down payment home loan. Below are a few to think about:

Pros

1. You Can Keep Your Money to Do Work On the House

There are likely many things you will want to do to your home shortly after moving in, such as decorating, painting, or furnishing. You may even want to do some full-scale remodeling that can add up in a hurry. For this reason, it is often better to keep your down payment money instead of incurring more debt to accomplish the aforementioned tasks.

2. More Reserves

Money in the bank will help you enjoy home ownership, and it will help you to cover the unexpected costs that many new homeowners do not foresee, i.e. high heating expenses, electricity, and inevitable problems. Having some cash reserves will ensure you can withstand some adversity and still keep up on your monthly payments.

Cons

1. Higher Rates

Usually, your lack of down payment will leave you with higher interest rates to cover your lenders heightened risk on lending. Shop carefully for your 100% financed mortgage, though, and you should find something comfortable for you that will make it a wise move.

2. Mandatory Escrow and PMI

Exceeding 80% Loan-to-Value on conventional loans will leave you with mandatory monthly escrow and Private Mortgage Insurance (PMI) fees. These can raise your monthly payments hundreds of dollars monthly. To avoid these fees, you should investigate breaking your no down payment mortgage into two loans.

No down payment loans give consumers flexibility; however, you should consider these factors before getting yourself into one.

Author: C.L. Haehl
Article Source: EzineArticles.com
Provided by: Programmable Multi-cooker

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