Financing companies are getting more and more creative in order to make home ownership more accessible. Longer amortization periods, lower interest rate, and more flexible repayment schedules are just a few of the endless array of financing options. Possibly the most popular financing method for buyers looking to get into their first home is the zero down mortgage.
Zero down doesn’t mean free there are costs associated with this type of mortgage. What it does mean is that you do not need a down payment to purchase a home. In the past 5% to 10% of the purchase price was needed prior to qualifying for a mortgage. This traditional financing still exists but the zero down option provides quicker access to home ownership.
There are often strings attached to any offer that says free and zero down home loans, are no exception. You are required to pay all the closing costs; such as legal fees, land transfer tax, real estate fees, hydro and water hook-up fees, moving expenses and the list goes on. Keep in mind that closing costs usually equal between 3% and 5% of the purchase price of your home. So on a $100,000 home your should budget between $3,000 and $5,000.
Next expect some sort of additional fees. In my experience most financial institutions want an appraisal completed as a condition of financing. Expect to pay $300 for an appraiser of the banks choosing. Lenders are in the business of lending money for profit, they have no desire to be real estate tycoons. So foreclosing on a property is usually a last resort.
So now that you are aware of the expense behind the Zero Down financing option, you are likely wondering how you qualify? It is similar to a traditional mortgage; a representative of the lender processes your application. Your credit is checked and a beacon score is allotted to you. A beacon score is simply a numerical scale that represents in the eyes of your lender, your ability to repay the outstanding balance of the loan.
For first time homebuyers having the privilege of Zero Down payment creates a more rapid approach to home ownership. Closing costs and additional fees aside this is an advantages method to get started in owning your first home.
