8/18/2004

Does A 0% Down Mortgage Cost You Less?

In a hot market which is pretty much what we've been having for quite a while, sellers are more apt to carefully review the buyer's down payment, loan source and interest rate. After all, the seller wants to make sure the buyer IS getting the loan and closing escrow. If you're a buyer, is a zero down loan a good idea? It's probably not if the property you're interested in is turnkey and just came on the market. A property like that will attract a lot of interest, and your 100% financing offer won't stand up next to a buyer who has 20% down or more.

Also, do you understand all the terms of your loan? A "no-cost" mortgage does not include payments by the lender for: Per diem interest, which is interest from the closing date to the first day of the following month, isn’t included because it is not known until the exact closing date is set; Escrows for taxes and insurance, which are borrower funds set aside to assure payment of the borrower’s future obligations, are not covered because they are not a cost of the transaction; Homeowners’ insurance is not covered because, while required by the lender, it also benefits the borrower; Owner’s title insurance is not covered because it is optional or paid by the seller; Transfer taxes, if any, are not covered because the amount is sometimes uncertain, and it is set by a governmental entity. The following article explains much more about this type of loan.

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