When you take a loan to buy a house, a down payment that may vary from 3% to 20% is normally required. But there are ways to purchase a property without a down payment. A number of players are present in this field. These include brokers and lenders. Different plans are available for the prospective homebuyer to choose from. Some of the schemes offer loans amounting to 100% or more of the value of the property. In most such cases a high FICO score is required; this is a credit score system invented by Fair Isaac & Co. Such a loan takes care of the down payment. The range of the loan could be from small amounts like $50,000 to a million or even more. One point to be borne in mind is that the monthly repayment depends on the amount of the down payment. Also, if the down payment is less than 20%, usually the lender insists on the buyer taking a Private Mortgage Insurance (PMI). Most financiers allow discontinuation of PMI after a couple of years, or when the principal amount is reduced by 20%. In many cases a second mortgage of the property, which is even available to people with bad credit, can possibly raise enough money for down payment. Generally speaking, the more borrowing, the more the interest and the repayment installments. But for home loans, interest and some of the expenses may be tax-deductible. The important point is the repayment capacity. It is possible to sell the property with the liability on. This may, on occasions, generate enough funds to meet the down payment for a new home. In instances where the lender goes bankrupt, the obligation to repay would remain. Free consultancy and support are available from the U.S. Department of Housing & Urban Development (HUD). |
