Is a No Down Payment Mortgage right for You, unfortunately it comes with a price?

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Is a No Down Payment Mortgage Right for You


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Making a down payment can be challenging, but it can be important - especially if you want to avoid Private Mortgage Insurance (PMI). You would have to pay 20% of the home's price up front. Depending on the price of the home, this can be tens of thousands of dollars. You also have to have money to cover escrow and closing costs. Fortunately, there are ways to avoid a down payment.

Many mortgage lenders offer loans that require “no money down”. All you have to worry about are the closing costs and escrow. These mortgages can make it much easier for you to get into a new home. But, these programs do come at a price.

Mortgages that do not require a down payment tend to have higher interest rates, which leads to a larger monthly payment. Also, you will have to pay PMI, which does not help you build equity in your home. If you live in a market where homes are expensive, though, no down payment mortgages can be an excellent way to get started. You pay a bit more, but you still will reach your goal.