No Money Down Home Buying
April 5th, 2009 | 
Author: No money down home purchasing loans are loans in which the bank will provide 100% of the purchase value and in some cases 106% to include the closing costs. The value, on a no money down loan, is based on the purchase price of the purchase contract or the appraised value, which ever is lowest. Normally the value is greater then the purchase price. The loan structure on a no money down purchase loan is usually put together with two loans, a first and second. The first mortgage is usually 80% of the total loan amount and the second is 20%. The reason for this is to avoid having to pay PMI. PMI is private mortgage insurance that the borrower pays for to protect the bank incase the borrower defaults on the loan. PMI is money wasted for the borrower since it neither pays down the principal or the interest. Any time a loan goes over 80% LTV (loan to value) the borrower automatically has to pay PMI. But since on an 80%/20% loan neither loan exceeds the 80% limit you can qualify for a combined loan to value (cltv) of 100% with out paying PMI. Normally rates on 100% cltv loans are a little higher then if you put money down but if you have no money to put down then this is the loan you need.
See our Purchasing a Home section for more details.
Posted in No Money Down Home Buying