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How To Buy When You Don't Have A Down Payment
How To Buy a Home With Zero Down
It used to be that the only way to buy with zero down was to buy a new construction home. Nowadays, many mortgage companies offer this on approved credit regardless of whether or not it is a new home you are buying or a resale. It is still more common however, for new construction builders to offer this "deal" which is really through their "in-house" mortgage broker.
Builders usually advertise it to draw your attention to their sales centre and hopefully you’ll buy from them. This is usually something they usually offer in the slower times of the real estate market.
For instance, right now you may not find very many offering zero down simply because the market is so good and they don’t need a hook to draw buyers in – the homes and condos themselves (and the low mortgage rates) are all that’s needed as an incentive to buy.
As for the actual mortgage brokers and their lenders that offer this "bargain", be careful as it may not be such a deal after all. Sometimes the only way they’ll approve you for "zero down" is if you have stellar credit and then they’ll either give a higher rate than the normal mortgage rates.
It is like a "cash-back" mortgage, which is when they give you a mortgage for your home and also an agreed-upon amount of actual cash. This cash is included in the mortgage and of course, subject to the same interest as the rest of the mortgage.
Generally cash back mortgages have a higher interest rate than the non-cash back ones – check it out, you’ll see! So back to zero down – the way it is similar to the cash back mortgage is that instead of giving you the actual cash they keep it and we all pretend that it was your downpayment.
Yeah, we know it is confusing and weird and to top it off, a higher interest rate. Your best bet is to speak to a mortgage broker (We could suggest a few if you’d like) and see what they have to say. Don’t forget, what can seem like a great deal at first can have you paying more than you need to – a higher interest rate can mean another hundred dollars a month!
We hope this is a bit of helpful information for you in your expanding knowledge of home buying. Please feel free to contact us should you have any questions or are ready to embark on your home or condo buying journey!