Wednesday, September 28 , 2022

Probing Into The Merits And Demerits Of 100% Home Financing

Buying a home is one of the biggest decisions of your life and it involves a lot of money, as well as risks. A small mistake may prove to be costly in the end. Therefore, it goes without saying that it is extremely important that you make your big investment really worth it. This will ensure that you do not end up having sleepless nights on your loan being unable to manage it the way you should.

There are lots of options to choose from when it comes to home loans so much so that you will be overwhelmed discovering these options ay one time. If only you know the pros and cons of each type of home loans and match it with your need and affordability, you will end up making the right choice. Remember, choosing the right financing option for your home purchase is just as important as choosing a home that is perfect according to your needs. It is only then your investment will be worth, whether you take it from a traditional bank or any other alternative lending sources such as and others.

True as it is that there is a large variety of mortgage types that exist, all of these are not created equal and may not be suitable considering your financial situation. If choose the wrong mortgage financing it will surely impact in different aspects such as:

• It will affect your financial health
• Your budget
• Your cash flow
• Your physical as well as your mental health and
• It will put you in a debt hole for a long, long time.

You can only avoid such dire situations only if sell or refinance your property but that is easier said than done.
Therefore, the best and most prudent way of approach is to know and understand the ins and outs of each of the home loan options and choose wisely.

100% Financing Sources

One of the most favored and popular choice of home loans amongst the borrowers is 100% financing. Tempting as it may sound that you will get hundred percent of the amount financed, it is however necessary to understand the ins and outs, pros and cons of 100% financing. This will help you to make an informed and educated decision as to whether or not it is a right choice according to your financial situation.

To start with you should know about the different sources of 100% financing. Ideally, you will come across a large number of different types of sources that provide 100-percent financing.
These include:
• First time homebuyer programs
• The housing program managed by the U.S. Department of Agriculture and
• A home loan program presented by the Department of Veterans Affairs

Well, you may not be able to avail any federally backed loans if you do not meet the eligibility criteria but you can surely avail a conventional financing option that is offered through a credit union. However, for this you will need to have two specific things such as:

• A good credit and
• The ability to pay a higher rate of interest.

According to the study report of The New York Times and Bankrate, most of the major lenders have reduced down payment requirements but on the other hand, they offer to very little or no 100-percent financing.

The Feasibility Of Such Loans

It is not always one hundred percent conventional financing will make sense for you, especially if you want to invest as little as possible for buying your home. Therefore, this type of loan is only feasible if you do not have any deposits to make a down payment for your home loan.

Moreover, if you wish to include using the purchased property for the purpose of income and investment then in theory, a one hundred percent financing will be the most suitable option for you. This is because when you invest less in such type of investment you will be able to:

• Generate more income from and at the same time
• Obtain greater returns from your investment

If you are an investor, then 100-percent financing will surely work in your favor. This is because this loan will enable you to leverage bank financing which in turn will build your cash flow. Therefore, one hundred percent financing is the best option if you want to achieve positive investor returns.

Allows Easy Entry

• One hundred percent financing will allow you to avail a loan much easily as compared to any other conventional loans when you are looking for financing your property to call your home. This is especially helpful for those borrowers who have little cash in hand to make a down payment.
• This type of loan is also a favorable option to those people who ideally do not qualify as a first-time homebuyer.
However, there are a few things that you should mind while entering into such a loan contract that will not need no down payment.
• It is essential for you to save money for making the future payments of the loan without failing.
• It is also required that you have adequate money in hand to meet with the emergency maintenance costs.

Last but not least, you should you should also make sure that you do not fail to pay up the property taxes after closing. If you fail to do so then it will severely affect your ability to stay in the house in the long run.

The Strings Attached

Just as any other loan option, one hundred percent financing will also come with a lot of strings attached to it.
There are a few restrictions placed on the loan. One such is that you will need to stay in the home or pay the funds back if you move out. This will leave you with no room to rent it, use it for additional income or investment purposes. A few programs such as the US Department of Agriculture’s Rural Loan program will require you to buy a property in the rural area.

Therefore, consider the equity and appreciation aspects and the higher costs and credit requirements before you avail one hundred percent financing.