No More No Down Payment Home Loans!

You may wonder why a financial institution would require you to put a deposit on a home purchase

, and, since they do, can you afford it?

Until the recent past, there were many mortgages that were available with no down payment, but these kinds of mortgages led to problems for the lenders, and now there are probably not any no down payment loans available.

Why do banks require a down payment? This was always the typical road to buying a home, and only recently had that requirement relaxed. But now it is back again, and it is important to understand.

A lender wants to make sure that you have a large amount of your own funds at risk in the home, and they also want to reduce their exposure by lessening the amount of mortgage required.

Because of the issues that these lendrs have faced, no down payment loans are probably non-existent, although first time home buyer programs still do exist. So let's say that you do have to put a deposit down. How much is it going to be?

The typical amount required is about 20% of the value of the home, and, even though this can be a substantial amount, it is worth trying to save since it will save money over the long run.

If you purchases a house valued at $175,000, you would have to put down $35,000 if the lender required a 20% deposit. Not many people have that sitting in their bank account. If you are on your second or third home, hopefully the increased value in your home will give you the needed funds for a down payment on a new home. But what about those who have not built any equity in their homes? For first time home buyers, the situation is better since there are many programs still around that help home buyers purchase their first homes through the use of a low deposit. Programs like this are part of government programs that guarantee the risk to the lender, so a bank that would not normally lend with a small down payment will take the risk. If the down payment is only 5%, the new homeowner only has to put down $8,750.

Talk to a professional mortgage broker to find out if you are eligible for lower down payment mortgages in today's mortgage environment.

by: Carter L. Oleary

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