Should you use 100 percent financing
when buying a home? If you can get it, why not?
There are pros and cons to 100 percent financing. One
con is that 100 percent financing doesn’t put
you into the new home with very much equity. Another
con is that your interest rate might be a little higher
than if you put the typical 20 percent down on the table.
But now, think about the pros. If you do have money
saved for a down payment, you can use that for repairs
(if doing so won’t make your interest rate higher
than if you had simply put the money down). The biggest
pro is that 100 percent financing could get you into
a home that you don’t have a down payment saved
for. Should you buy a house if you don’t have
down payment money saved? To answer that question, weigh
your options. Are you renting a two bedroom apartment
for $700 a month right now when you could buy a three
bedroom home with a payment of only $600? If you are
in a similar situation, consider buying. Your home purchase
will be an investment. You will stop throwing money
away toward rent and building equity in a house that
can also serve you with various tax deductions.
When you are getting your potential new home appraised,
let your appraiser know that you are seeking 100 percent
financing. Ask your lending institution about financing
in improvements you want to make on the property, too.
Chances are that your bank will make the appraisal arrangements.
Your banker will fill in your appraiser on the details
he or she will need when deriving a fair market value
for the property. For instance, if you make a $70,000
bid on a house that you plan to make $30,000 in improvements,
let your banker know. With the knowledge that the property
will have improvements made, the appraiser will be able
to offer the bank a more accurate appraisal of how much
the property will actually be worth with those improvements
made. If that’s the case, you can probably include
the cost of those improvements in your loan!
If you have any questions about whether you should
use 100 percent financing or if you are even eligible
for it, fill out our online application. Our mortgage
professionals will be able to help you determine if
100 percent financing is an option that’s right
for you.
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