Have you heard of 100% financed loans? A mortgage that is a 100% financed means that the home buyer is taking out a loan for the full purchase price of the home they are buying. This means that there is no down payment required in order to secure the loan.
This kind of a mortgage loan is ideal for those who are strapped financially and for whom the need to save for a down payment puts home ownership out of reach.
100% financed loans are riskier for the lender – if the borrower defaults on the loan and the property has decreased in value, there may be little to no equity to try and recoup that loss. Because of this, there are usually other ways to secure the loan to help reduce the risk to the lender.
If the borrower has other assets, they may be used as collateral. The home buyer may have to pay additional money each month toward PMI (private mortgage insurance). Or, the program may be backed by a government entity, which insures the loan for the lender in the event of default.
Two such programs are through the US Department of Agriculture and the Department of Veterans Affairs.
The USDA loan program is backed by the United States Department of Agriculture, designed to help moderate- and low-income households purchase homes in rural or non-metropolitan areas. The loans associated with this program offer the option of making no down payment and allow for the closing costs to be covered by the seller (if they agree in your purchase contract), making the financial output by the buyer minimal.
The VA mortgage program is backed by the Department of Veterans Affairs and is available to active duty military members, veterans, and their spouses. It allows borrowers to finance 100% of the purchase price, and is one of the most affordable loans in terms of the associated fees and interest rates.
Closing Costs and Other Fees
If you’re considering a 100% financed loan with no down payment, then one thing you need to keep in consideration are the closing costs associated with such a loan.
With any mortgage, there are a number of closing costs that need to be covered, and include everything from the loan processing fee to appraisal expenses. The home purchaser has to take care of these costs, and they can run anywhere between $2000 and $5000. There may be ways around these costs though, so speak with your agent about seeing if they can write these costs into your offer to the seller.
If you’re looking for home loan financing in Seattle, then TILA Mortgage is ready to help. Our expert loan consultants work with clients to help them find the right home loan programs, guiding them through the entire process step by step. If you’re in search of a 100% financed loan, then turn to TILA Mortgage’s experts to make the process a whole lot easier. Contact us at (206) 766-8888 and set up an appointment!