100% mortgage financing can help you buy a house with little out of pocket expense. So whether you are a first time homebuyer or an investor, you can easily purchase a home. But not all zero down mortgages are the same. So you need to be careful in compare financing offers and finding terms that best meet your budget goals.

Reasons To Pick Zero Down Mortgages

Zero down mortgages are ideal for those renting but who want to get into a house with little cash. For the same amount you pay on rent, you can build home equity through appreciation and principal payments. 100% mortgage financing is also an option for those looking to buy a house as a second property or as an investment. Without tying up a lot of capital into a down payment, you can secure financing with reasonable rates.

Difference In Zero Down Mortgage Terms

Lending companies treat “zero down” mortgage terms differently. So it is important that you know what kind of contract requirements you are agreeing to. With 100% financing, you are still required to pay for closing costs, which can add up to thousands. The advantage to these terms is that you have a good idea of the cost of fees. You also have the opportunity to lower rates or change terms by paying additional points at the signing. Loans that require no money at closing are often called 102% mortgages. Closing costs are still charged, but they become part of the principal. So your loan amount is greater than the property’s selling price, up to 5%. You will also be paying interest on the fees.

Finding The Lowest Costing Financing

It is especially important to look at the APR number when comparing “zero down” financing. With this number you can determine the real cost of the loan, regardless of when closing costs are paid. When analyzing costs, take a look at the fine print to determine when application fees are due. Also consider that you may have to pay premiums for PMI if you choose a conventional loan. Subprime lenders waive this requirement in most cases.

View our recommended Mortgage Brokers Online.

Carrie Reeder owns ABC Loan Guide, an online resource with information about Mortgage Refinancing Online and Home Equity Line of Credit lenders.

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