4 Reasons Buying a Home With No Money Down Is a Bad Idea

Buying a Home With No Money Down

Buying a home is a big step. Owning property is a vision come true, so it pays to understand how the real estate market works. These days, you can purchase a home without a down payment, so many think it is simply a good idea. That is, however, far from the truth: no down payment is a bad idea. In tis blog we will discuss completely about  why Buying a Home With No Money Down is a bad idea.

Conventionally, many options allow consumers to purchase property with a low down payment rate of 20%. With the number of people looking to go the zero down payment way growing every day, it is imperative to understand the several problems it represents.

Why Buying a Home With No Down payment Is a Bad Idea

It is understandable why putting down large amounts of money for buying a home can be difficult. Especially with housing market prices soaring sky high. Consequentially, lenders and mortgage companies are more than willing to offer mortgages way below the 20% down payment.

In fact, it is possible not to put down any money at all and get a home loan. If you are looking to go that way, here are four reasons why that can turn out to be a bad idea:

1- High-Interest Rates For Buying a Home with no down

Making no down payments is a bad idea. No down payment means more to pay and, as the lender is the only one staking money, they would only view you as high risk. Accordingly, you will likely be offered high-interest rate loans as against when making a large down payment.

2- Limited Number of Lenders Willing To Provide Loans

When there is no money down, fewer lenders would be willing to provide loans. Some programs, such as VA and USDA loans, do not require down payments. But, others allow loans can have strict down payment requirements. But most of the lenders you deal with would want you to put some money at stake for the property purchase.

When shortlisting potential lenders that do not need you to pay a down payment, you may find it hard to get a reasonable rate quote. That means you may end up with a lender that charges excessive fees with unfavorable terms.

3- Debt Is Not Covered Even If You Sell The Property

Not making down payments will enlarge the entire amount you have to pay for the house. So, even if you must sell the house, it will not be enough to cover it all. Payments such as real estate agent’s commission and other fees will stack up to many thousand dollars.

For this reason, even by selling the house, you won’t be able to make the amount to pay for the property. Like a trap, it could leave you feeling helpless- unless money is on the table. Equity can take a long time to build if loans took without down payments.

So you may owe a large amount or even go underwater by owning a property that sells for less than you owe. We want to stay away from problems such as refinance and re-selling.

4- You Are Paying Mortgage Insurance If You are Buying a Home with No Down Payment

Except for VA loans, mortgage insurance has to be taken care of on your end if no down payment occurs. That only adds more to the monthly housing cost equation, and this type of insurance only protects the lender from losses.

And, in the event of stopping the mortgage payments, the mortgage company will not protect against foreclosure. On the contrary, this will ensure the lender is not obligated to pay losses if the property does not sell for the owed amount. So this is the last reason for buying a home with no money down and its surely a bad idea.

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