Zero Down
A zero down loan is good when you don't have enough cash to pay
your closing costs and make a down payment on the purchase of your
home. It is also used to avoid paying Private Mortgage Insurance
(PMI) 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 (LTV). PMI is usually required,
and the insurance charges are not tax deductible.
- Get an 80 percent
first loan and a 20 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 carry back a second loan for
the balance of the purchase price.
Some zero down programs allow
you to borrow 3 to 7 percent of the purchase price 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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