What Type Of Zero Down Mortgage Is Best For You?

Below are 9 different types of zero down mortgage that you can qualify for. Each one has positive and negative aspects. Read and learn about which zero down mortgage will suit you best.

80/20:
The 80/20 loan is simply an 80% first mortgage with a 20% second mortgage for a total of 100% financing. In other words you are getting two loans. This is the most common no down mortgage.

The positive aspect of this loan for a subpime borrower is that the interest is typically much lower than a 100% one loan.
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This zero down mortgage is a beneficial loan for conforming borrowers because it will help you avoid mortgage insurance. Mortgage insurance is an insurance policy that you pay and that is of no benefit to you. It simply protects the lender in case of default/foreclosure. Sub-prime loans almost never have mortgage insurance, but be sure to ask.

The negative side of this loan is that you will pay two different sets of closing costs, which could tack on an extra couple of thousand dollars.

Also many people are afraid of having to make two different payments. Have no fear. You are more or less paying the same amount as if it was one loan and typically they are due at the same time.

One final thing to think about is that the second mortgage interest rate will almost always be significantly higher than the first mortgages interest rate.

The seller can typically pay 3% of the purchase price of the home towards closing costs with a conforming loan. With a sub-prime loan the seller can typically pay 6% of the purchase price towards closing costs.

100% One Loan:
This type of zero down mortgage is pretty straight forward. It is simply one loan for 100% financing of the purchase price.

Unfortunately sub-prime borrowers will typically pay a much higher interest rate than they would with the 80/20 home loan.

For conforming borrowers the down side is that you will pay mortgage insurance which can range from .55% to 1.94% of the loan amount. The benefit for conforming borrowers is that the interest rate will be lower over all since you will not have a second mortgage. Plus once you have 20% equity in the home you can get the mortgage insurance taken off.