Many people prefer to get a home loan with 100% financing or do not want to make any down payment. But if you are thinking about going for this type of loan, refer to these points while considering various mortgage options.
To be eligible or 100% financing on a purchase mortgage loan, it is necessary that your credit score must be minimum 600 or more. If it is in the range of 600-650, you might have to apply for 100% finance through a subprime mortgage lender.
For a credit score more than 650, you can be eligible for the mortgage from most mortgage lending companies online and get the loan approved.
If you have credit score is in range of 580-600, you may have to make a down payment of at least 5% to get the loan from a subprime mortgage lender.
A mortgage loan with 100% financing can mean higher interest rate. At times, a good substitute is to go for an 80/20 loan, where there are 2 mortgages of which the first mortgage has lower rate and the second mortgage carries higher interest rate. The advantage of this type of loan is that it does away with PMI insurance that can cost $100 or more for each month, based on the amount of loan.
Besides ask for quotes for 100% financing and quotes for 95% financing, where you make a down payment of 5%. Find out if the savings on the interest rate are substantial to make the down payment.