In recent years, in online and newspaper articles you may have seen more and more mortgage companies have started to offer programs with little to no money down payment options thanks to government-sanctioned companies Freddie Mac and Freddie Mae. And these mortgage companies are advertising the heck outta them! It’s can be a pretty awesome deal for homebuyers that qualify but to any awesome deals, there are downfalls. Hal M. Bundrick, a certified financial planner and contributor from NerdWallet, discussed in a recent post the upsides and downsides to the program:

The Upside

  • The No-Brainer – no down payment is required
  • Home Buyers who qualify can purchase their new home sooner
  • More money saved for expenses later

The Downside

  • Borrowing the home’s full amount is a large financial risk; it means starting with zero equity in the home
  • The lender sees the homebuyer as a greater risk to borrow to
  • Mortgage insurance premiums may be higher
  • Monthly payment may be higher

It’s been announced that some zero down programs will be going away. Starting November 1, 2017, Freddie Mac is pulling the plug on some zero down payment programs. This may be a good thing to some. This allows more homebuyers to begin their homeownership on a strong leg to stand on. One of the benefits, including starting with equity in the home.  There will be still low payments options to be offered, but the minimum will be 3% down.

It’s worth noting other grants and government programs like Veterans Administration (VA) and the United States Department of Agriculture (USDA) loans are here to stay.

For more information about the process and more about the zero down mortgage payment options, read the full article from the Huffington Post.

MHM WI Disclaimer

Advertisements