Can Closing Costs Be Financed As Part Of My Mortgage 100% Financed Mortgage Loans: A Viable Option Even With Bad Credit

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100% Financed Mortgage Loans: A Viable Option Even With Bad Credit

No one will dispute the fact that raising the necessary funds to buy a home is a difficult undertaking. But trying to do it with bad credit scores to your name is even more difficult. What not everyone knows is that 100% financed home loans are available even when bad credit is a factor in the equation.

For current renters, this is good news, giving them the opportunity to become homeowners despite their imperfect financial situation. But how can approval with bad credit be possible when a typical mortgage is so high?

There are good reasons why some lenders are willing to grant a home loan. The thing to remember is that no lender is losing money, so their offers are calculated to benefit them as well. Here are some factors to consider when buying a home.

What is 100% financing?

The idea of ​​100% financed mortgage loans may seem a little strange, but there is nothing to suspect. Usually, buying a property involves making a down payment and paying the rest with a mortgage. What 100% financing means is that no down payment is required.

It is even possible to get 105% financing, with the additional 5% being used to cover the closing costs of the real estate contract. Between legal representation and other costs, the fee on top of the property price can be $10,000 to $30,000, so getting approved with bad credit can be expensive.

However, certain conditions must also be taken into account. For example, the interest charged on a mortgage loan can be quite high and the interest structure quite complicated. Therefore, some planning and research is required before moving forward with the application.

100% financing advantages.

Despite the associated costs, there are some real benefits to looking for 100% financed home loans. The most obvious comes with the fact that no down payment is needed. That means no time to spend saving up to $20,000 in cash.

Another is that you don’t need to pay for private mortgage insurance, as it is covered by the interest rate. This fee is going to be much higher than normal, but it is beneficial in general, especially since those who take out this insurance separately also end up charging a fee.

Of course, a key benefit is that by getting approved with bad credit, the possibility of buying a home becomes a reality. This alone makes all the negative aspects that can be associated with the mortgage loan that covers the full price of the property can bring.

Disadvantages of 100% financing.

There are some downsides to getting 100% financed home loans. For example, even if you do not worry, the total cost of the mortgage may be higher. With a $200,000 property, a $200,000 mortgage repaid over 30 years costs more, including interest, than paying off a $180,000 mortgage after a 10% down payment.

Also note that because the applicant gets approved with bad credit, the interest rate is higher. This means that the total repayment amount during the term of the mortgage is going to be very high. Plus, the rate is adjustable rather than fixed, meaning repayments can increase dramatically over time.

Finally, when using a 100% home equity loan, the buyer starts with zero equity. Typically, equity is represented by the size of the down payment. And without equity, there is no guarantee if a loan is required in the near future.

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