What Type Of Zero Down Mortgage Is Best For You?

Author: Matthew Allen

Below are 9 different types of zero down mortgage that you can qualify for. Each one has positive and negative aspects. Read and learn about which zero down mortgage will suit you best.

80/20: The 80/20 loan is simply an 80% first mortgage with a 20% second mortgage for a total of 100% financing. In other words you are getting two loans. This is the most common no down mortgage.

The positive aspect of this loan for a subpime borrower is that the interest is typically much lower than a 100% one loan.

This zero down mortgage is a beneficial loan for conforming borrowers because it will help you avoid mortgage insurance. Mortgage insurance is an insurance policy that you pay and that is of no benefit to you. It simply protects the lender in case of default/foreclosure. Sub-prime loans almost never have mortgage insurance, but be sure to ask.

The negative side of this loan is that you will pay two different sets of closing costs, which could tack on an extra couple of thousand dollars.

Also many people are afraid of having to make two different payments. Have no fear. You are more or less paying the same amount as if it was one loan and typically they are due at the same time.

One final thing to think about is that the second mortgage interest rate will almost always be significantly higher than the first mortgages interest rate.

The seller can typically pay 3% of the purchase price of the home towards closing costs with a conforming loan. With a sub-prime loan the seller can typically pay 6% of the purchase price towards closing costs.

100% One Loan: This type of zero down mortgage is pretty straight forward. It is simply one loan for 100% financing of the purchase price.

Unfortunately sub-prime borrowers will typically pay a much higher interest rate than they would with the 80/20 home loan.

For conforming borrowers the down side is that you will pay mortgage insurance which can range from .55% to 1.94% of the loan amount. The benefit for conforming borrowers is that the interest rate will be lower over all since you will not have a second mortgage. Plus once you have 20% equity in the home you can get the mortgage insurance taken off.

The seller can typically pay 3% of the purchase price of the home towards closing costs with a conforming loan. With a sub-prime loan the seller can typically pay 6% of the purchase price towards closing costs.

2/28 or 3/27: This loan is a very common zero down mortgage for sub-prime borrowers but conforming borrowers can take advantage of this loan as well. This loan is an Adjustable Rate Mortgage also known as an ARM. What this means is that the loan’s interest rate is fixed for the first 2 to 3 years of the loan, and then is fully adjustable for the remaining years of the loan.

These loans have caps, meaning they can only fluctuate a fixed percentage per adjustment and have a max in the percentage that they can rise for the life of the loan.

A quick example of this would be as follows. Lets say you have a 2/28 loan and the interest rate is 7% with caps of 3% and 6%. So with the first cap being 3% it can only rise a maximum amount of 3% per adjustment. The second cap of 6% is that the interest rate can only rise by a maximum of 6% for the entire life of the loan. So the worse case scenario is that your interest rate would rise from 7% to 13%. But remember it can also fall as well.

I refer to these types of zero down mortgage as band-aid loans. It gets you into a house and at the end of the 2 or 3 year period you can refinance. Hopefully at this time you are now a conforming borrower and you will qualify for a fixed home loan at a lower interest rate.

The seller can typically pay 3% of the purchase price of the home towards closing costs with a conforming loan. With a sub-prime loan the seller can typically pay 6% of the purchase price towards closing costs.

VA Loan: The VA is 100% financing and has no mortgage insurance. Unfortunately you will need to be a veteran to qualify for this zero down mortgage.

The good thing is that this type of zero down mortgage is underwritten on a case by case basis. So even if you don’t have great credit or have other issues such as not having any credit at all, you still have a good chance of getting one of these loans.

Seller can pay all closing costs.

USDA Rural Housing: These 100% loans were once known as farm home loans. They offer zero down mortgage financing and are also underwritten on a case by case basis.

To qualify for one of these zero down mortgage you normally need good credit, but not always. All collections and charge off’s will need to be paid. The property can not be located anywhere the USDA (United States Department of Agriculture) deems urban.

There are also income limitations with this program as well as certain criteria that the home must pass.

Seller can pay all closing costs.

Emerging Markets: This is another awesome zero down mortgage. This program is especially useful for home buyer’s who have limited or no credit at all. Through this program they allow you to build alternative credit through other bills such as an electric bill, phone bill, rent etc.

There are some income limitations to this loan depending on where the home is located. The income limitations are higher than those with the Rural Development Program.

Seller can pay up to 6% of sales price towards closing costs.

State or Local Financing: Some states also offer a zero down mortgage. These loans come and go depending on funding. They are definitely worth looking into.

For example Oregon has the Oregon Bond Loan.

The requirements for these types of loans will vary but they will be more strict than some of the other types of 100% financing that are available.

You might need to do some footwork for this type of zero down mortgage. You may be surprised to find that your loan officer has never heard about these programs. Because these loans are government sponsored you will need to call, write, or go down to your local government offices. Below are some other government agencies you can contact for special programs.

HUD/FHA 451 7th St. Washington, DC 20410 www.hud.gov

Fannie Mae 3900 Wisconsin Ave. NW Washington, DC 202-752-7000 www.FannieMae.com

Freddie Mac 8200 Jones Beach Drive McLean, Virginia 22101 www.FreddieMac.com

When you contact your local government agencies about the zero down mortgage. You should also ask about special purchase programs they may be offering as well. Many times government agencies will work with several of the local contractors to build affordable housing.

Basically the government gets a special rate from the contractors and then will subsidize the remaining amount to offer the homes at a much lower cost. For example a home may be worth $125,000 but the government will sell it for only $85,000 to those that qualify.

You can also contact you local building associations to find out about other special programs that they may be involved with. Just look in your phone book for state or local builder associations.

FHA Loan: The FHA loan is not actually a 100% financing loan. They do require at least a 3% down payment. You can use down payment assistance programs to cover the 3% plus your closing costs.

Most people are under the assumption that the government is the one loaning the money. In reality they are insuring the loan in case of a loss. So if you no longer made the payments and the house was foreclosed upon the government pays the lender off and takes the home.

This program allows lenders to loan money to people that would not normally qualify for a home loan. There are housing price limits as well as strict guidelines with this type of loan

About the author: Matthew Allen is a mortgage consultant with Action Brokerage Services, Inc. in Medford, Oregon. He is also the author of ""How To Buy A Home With Zero Down, Even With Damaged Or No Credit"". You can visit his website at http://www.realmortgageadvice.com

Understanding a UK Commercial Mortgage

Author: Commercial Lifeline

In many ways a commercial mortgage is just like a residential mortgage in that you pledge real property as collateral against a loan to either buy or refinance that property. You can also receive a commercial re-mortgage and use it as a line of credit for any business purpose. When you use a commercial mortgage to buy property, or to raise funds for any other business purpose, the lender retains an interest in that property until the loan has been paid in full. Unlike other types of business loans, which usually have a relatively short repayment period, you can take out a loan for as long as 30 years if you like.

The lender receives repayment of the commercial mortgage principal and interest over the lifetime of the loan. If you default on the loan and go into arrears then the lender can foreclose and take possession of the property which was used as collateral.

Generally speaking, the interest on a commercial mortgage is tax deductible and the net proceeds of the loan are not considered to be taxable income. However, you should always check with your accountant to be sure because the tax consequences can be severe should it be determined that your usage of the funds was not for a qualified business purpose.

Should you be seeking a commercial mortgage for the purposes of operating your business, rather than actually buying property, then the lender will either want to re-finance your current mortgage, and include enough money to provide the amount that you are seeking, or they may arrange an equity line where they lend you the difference between the current value of your commercial property and the amount that you owe on the current mortgage.

There are generally two types of interest schemes available when you are applying for a commercial mortgage.

The fixed rate commercial mortgage establishes an interest rate that is in place either for the life of the loan or for a fixed period of time. If it is for a fixed period of time then it will normally convert over to the second type of rate, which is called a variable interest rate, after the fixed time period expires.

In some cases your lender may add a Early Redemption Charge (ERC) clause to your commercial mortgage contract which states that if you pay off the note prior to the end of the fixed rate period then the lender is entitled to a one-time lump fee to offset their loss of expected income. In some cases this ERC may extend to longer periods possibly up to the entire term of the loan. Be very sure to read your loan contract carefully to make sure that you understand the implications of the ERC if it is present.

With competition from lenders heating up you'll find that many of them are dropping ERC clauses all together. If there is one present in your loan contract you may be able to negotiate it away with little effort. It's worth trying in any case and you can always apply somewhere else if your lender is not willing to negotiate.

In the case of a variable interest rate commercial mortgage the rate is based upon those issued by Bank of England. The lender will usually state that the rate consists of the published rate, which will likely vary up and down over the life of the loan, plus some pre-determined premium that remains the same for the life of the loan. Be sure that you understand how frequently your rate will change and that you are comfortable with the amount that the lender is charging as a premium. As with any terms of your loan you can negotiate both of these factors.

A fixed rate commercial mortgage is a good choice when you feel that interest rates are headed up sharply and you want to lock in the current rates. On the other hand, if interest rates are in flux, and economic indicators point to a down trend, then a variable rate may be your best choice.

Keep this strategy in mind during the lifetime of your commercial mortgage. If you are locked into a fixed rate, and interest rates have dropped significantly below what you are paying, you should consider applying for a remortgage and selecting a variable interest rate to take advantage of the lower rates. On the other hand, if you are in a variable, and all indicators are that interest rates will be skyrocketing soon, then look to move into a fixed rate so you can protect yourself against future increases.

About the author: Commercial Lifeline are

Commercial Mortgage and Bridging Finance specialists.

This article comes with reprint rights. Feel free to reprint and distribute as you like. All that we ask is that you do not make any changes, that this resource text is include, and that the link above is intact.

Understanding the Importance of Mortgage Protection Life Insurance

Author: Claire Bowes

Your house is a big investment – probably one of the biggest you’re every likely to make. It is also the place that you and your loved ones call home; a shelter and haven from the outside world. That’s why it is so important to ensure that your home and family are protected in the event of your death. It’s not a topic that any of us like to dwell on, but the sad fact is that should you die and the family are no longer able to afford repayments on the house, they will lose the property and the roof from over their heads.

Having a good life insurance policy in place to protect your property in the event of your death is vital. When you die, your family will have enough to worry about without the added stress of how they are going to hold on to the family home. Your life insurance policy will ensure that this problem is eliminated, with the mortgage balance being paid in full upon your death.

The main types of mortgage life cover

The type of mortgage life insurance cover that you require will depend upon what type of mortgage you have, a repayment or an interest only mortgage. There are two main types of mortgage life insurance cover, which are:

* Decreasing Term Insurance * Level Term Insurance

Decreasing term insurance

This type of mortgage life insurance is designed for those with a repayment mortgage. With a repayment mortgage, the balance of the loan decreases over the term of the mortgage. Therefore, the sum of cover with a decreasing term insurance policy will also go down in line with the mortgage balance. So, the amount for which your life is insured should match the balance outstanding on your mortgage, which means that if you die your policy will hold sufficient funds to pay off the remainder of the mortgage and alleviate any additional worry to your family.

With the decreasing term insurance, the cover is usually taken out over the term of the mortgage, and payment is made should you die during the term of the policy. Once the policy has expired, it becomes null and void, so you will receive nothing at the end of your policy if you are still living. There is no surrender value on this type of cover, but it does provide a cost effective means of protecting your home and family during the life of your mortgage.

Level term insurance

This type of mortgage life insurance cover is for those that have a repayment mortgage, where the principle balance remains the same throughout the term of the mortgage and the repayments made by the property owner cover the interest payments on the mortgage only.

The sum for which the insured is covered remains the same throughout the term of this policy, and this is because the principle balance on the mortgage also remains the same. Therefore the sum assured is a fixed amount, which is paid should the insured party die within the term of the policy. As with decreasing term insurance, there is no surrender value, and should the policy end before the insured dies no payout will be awarded and the policy becomes null and void.

Terminal illness benefit

Both of the above types of cover normally include terminal illness cover, which means that the mortgage is cleared should you be diagnosed with a terminal illness rather than waiting until you actually die. This helps to ensure that you do not have the additional worry of trying to meet repayments when a terminal illness takes away your ability to work and earn money, and at a time when the whole family has enough to worry about without having to stress about meeting mortgage repayments.

Critical illness cover

Critical illness cover is another type of insurance policy that can be added on to either of the above mortgage life insurance polices and provides an extra element of protection and peace of mind. This type of cover can also be taken out as a stand-alone policy, but usually proves much better value if simply added on to a main insurance policy.

With critical illness cover you will be eligible for a payout in the event that you are diagnosed with a critical illness. If you then go on to recover from the critical illness, the payout is yours to keep but the policy becomes null and void following your claim. The illnesses that are covered by this type of policy are defined by the insurer so you should ensure that you check the terms when taking out critical illness cover.

Adding critical illness cover to your policy will only increase your repayments by a small amount, but can provide valuable protection if you are diagnosed as critically ill and are therefore unable to work. With your mortgage repaid from the payout of this policy, you will not have the additional worry of trying to keep a roof over your head at a time when you should be concentrating on trying to make a recovery.

Summary

As indicated by the features of the two main types of mortgage life insurance cover, the policy you go for will depend largely upon the type of mortgage you have. Both types of cover offer value for money, with some really low cost deals available. Of course, the amount that you pay will ultimately depend upon the level of cover you require. For total peace of mind it is always advisable to go for a policy with critical illness cover incorporated into it.

Having some form of mortgage life cover is essential to protect your home and your family. After working hard to buy your own property, the prospect of it being repossessed in the event of your death can be worrying both for you and for your family. A mortgage life cover policy will ensure that this does not happen, and will give your family the security of knowing that whatever happens they will still have a roof over their heads.

About the author: Claire Bowes is a successful freelance writer and owner of Life Insurance Quotes where you will find further information on

Critical Illness Cover and

Mortgage Protection Cover