Finding a �no money down� mortgage loan is actually easier for someone with poor credit. Subprime lenders are more willing sign off on these deals than conventional lenders. But before you jump into a mortgage contract, make sure you understand the terms and are getting a good deal.
Benefits Of A �No Money Down� Mortgage
A �no money down� mortgage allows you to buy a home with little to no money due at closing. In essence, you are trading a rent payment for a mortgage payment, which makes the jump easier. However, you will pay a higher interest rate for these terms.
By not paying closing costs, it makes getting out of a home much more cost efficient. For example, say you pay $6,000 at closing for your traditional mortgage. In a year, you have to move for a number of reasons. You are out that money, even with a lower interest rate. With a �no money down� loan, you wouldn�t worry about that losing that money.
What �No Money Down� Means
�No money down� can mean two different things when it comes to mortgages. With some lenders, �no money down� means that no down payment is required, but closing costs are. Usually closing costs will equal 3% to 6% of the loan amount, which equals a couple of thousand.
Other lenders describe home loans where no money, not closing costs or down payments, is required. Instead, closing costs are included into the principal amount, usually up to 2% of the loan�s value.
Locating �No Money Down� Lenders
With adverse credit, you will want to shop around for a subprime lender. Online you can find hundreds of financing companies, many with competitive financing rates. If you don�t know where to start, check out a mortgage broker site. They connect to several lenders and can get you mortgage quotes in minutes. Then expand your search as you come across lenders.
When you request a loan quote, be sure to select the �no money down� term. This may mean checking a box or selecting a specific loan term. Just be certain you know what �no money down� means with each lender before making a decision about a financing package.