Although most people will tell you that buying a house without a down payment is no big deal, the fact remains that it is difficult. Even so, what others say also has some element of truth. You can get a 'zero down payment' home loan if you are persistent enough and are not discouraged easily when you are refused a loan or are told that it is impossible. Your persistence will eventually lead you to a lender prepared to work with you.
But experts advise against taking a 'no money down' home loan even if some lender is ready to give the loan. The reasons they cite are sound and carry weight.
Home loans are generally structured to make you pay ten to twenty percent of the cost as down payment, which makes the amount loaned nearly eighty percent of the total cost. Upon negotiating, the down payment can come down to five percent. If you have not been able to save even five percent of the cost of the home that you intend to buy, it means that you have been unable to make consistent monthly savings. This indicates that you are not yet ready to shoulder the additional financial responsibilities of home ownership.
Lenders may tell you about no down payment and no closing cost loans, but if there are no apparent closing costs, the costs have probably been included in the price. The lenders generally apply a 28/36 rule while deciding on the amount of loan for sanction. This means your monthly home loan repayments should be within twenty-eight percent of your gross monthly income, with total debts contained within thirty-six percent.
However, some experts recommend using a thumb rule of a highest home purchase price limited to two and half times your gross annual income with the amount of loan never above twice your gross annual income. You need to consider everything calmly and adopt a prudent approach when you decide to go in for a zero down payment home loan.
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