Are Zero Down Payment Mortgages Too Good to Be True?
The thought of having enough money to place a down payment on a house when you take out a mortgage loan is daunting, unless you are using the proceeds of a previous home sale to pay for your new property. You may have even heard about the sobering statistic that, if you have never owned a home, you will never own one unless your parents co-sign the mortgage loan or give you money for a down payment. The good news is that certain types of federal mortgage programs offer mortgage loans with lower down payments, making them more accessible to working people who have never owned real estate before. FHA, VA, and USDA loans typically require a down payment of five percent or less of the sale price. Some VA and USDA loan options even issue the mortgage loan with a zero down payment. This is an attractive option, albeit a risky one, for borrowers who qualify for it. If you are struggling financially after borrowing a zero down payment mortgage, contact a Jupiter foreclosure defense lawyer.
The Ideal Candidate for a Zero Down Payment Mortgage
To qualify for a zero down payment mortgage, you must be eligible for a USDA or VA mortgage. VA mortgages are only for people who have served in the U.S. Armed Forces, and USDA mortgages are only for buying houses in rural areas, so if you want to buy a condo in downtown Fort Lauderdale and you have never been in the military, you cannot get a mortgage loan without paying a down payment. Zero down payment VA and USDA mortgage loans are only available to eligible applicants with a credit score of at least 620.
Zero Down Payment Mortgages Are as Risky as They Sound
Qualifying for the mortgage loan is only the first step, and at first, getting a zero down payment mortgage might feel like a win. You would only qualify if you had a stable income and a manageable enough pre-existing debt burden to keep your credit score above 620. If you have money in savings, you have your reasons for keeping it in cash instead of placing a down payment; perhaps you are saving it for emergency expenses.
If you don’t put a down payment on your mortgage, your monthly payments will be much higher than they would even with a small down payment, and at least in the beginning, almost the entire payment amount goes to interest. With no home equity arising from a down payment, you can easily become underwater on your mortgage if the value of your property depreciates even slightly. This means that selling the property will not improve your financial situation. Also, with the high monthly payments, you are in greater danger of mortgage foreclosure if you suffer a reduction in income.
Work With a Debt Lawyer About Qualifying for an Affordable Mortgage
A South Florida debt lawyer can help you stay out of trouble with mortgage loans. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.
Source:
experian.com/blogs/ask-experian/what-is-zero-down-mortgage/#:~:text=A%20no%2Ddown%2Dpayment%20mortgage%20is%20a%20type%20of%20home,financing%20on%20your%20home%20purchase.
