 |
 |
Buying a Home Without a Down Payment
By Sheryl Landrum
CMR Columnist
 E-mail Friend
 Printer Friendly
The San Diego Union-Tribune recently reported that California documented the largest (home loan) foreclosure total of any state for the fourth month in a row, according to RealtyTrac, a company that tracks home foreclosures and bank owned properties. While adjustable rate mortgages and option arms are largely to blame, many homeowners who took 100% financing on their mortgages are also in danger of a home foreclosure. Why has this become such a problem?
Current home values and home appreciation have flattened in the last couple of years. Those borrowers who purchased homes without a down payment and financed 100% of their home mortgages are now finding that they are unable to refinance their home loans to lower their interest rates or to access their home's equity for needed cash. If a homeowner purchased a new home for $400,000, with 100% financing, and the home is now worth $380,000, the only way to refinance the mortgage is to re-qualify for 100% financing at $380,000 and to have $20,000 to cover the difference in value as well as the costs to refinance. To put it simply, most people cannot afford to refinance homes they purchased a couple of years ago with no down payment.
Having a down payment can lend a layer of protection and security in todays housing market. Over time, our homes appreciate and they're usually our best investment. Do your home buying and your mortgage loan smartly--if you purchase a home without a down payment, make sure you have reserves to access should you need them.
About the Author
Sheryl Landrum is a Senior Loan Officer with Charter Funding, Inc. in Carlsbad, California and a freelance writer specializing in mortgage issues.
|
 |
|
|
|
|
