 Sam
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 Posted: Fri Jun 18, 2004 2:45 am Post subject: Low Down Payment Mortgage |
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Low down payment mortgage is a type of loan, in which borrower is required to make only a low down payment, before borrowing a very high percentage of the purchase price.
Features:
- Here the down payment is usually less than 20%. But if the mortgage is insured, the percentage of down payment becomes 3% to 5% of the purchase price.
- Fannie Mae, Freddie Mac, and Ginnie Mae are the three primary investors in home loans provide who provide low down payment mortgages. Fannie Mae's Flexible 97, Freddie Mac's Alt 97, etc. are the various loan programs available in the secondary market.
- It is beneficial for first-time home buyers, or those who have good credit but not a lot of savings.
- In this type of loan, closing costs or settlement costs are paid at the time of legal transfer of the home from seller to buyer. Generally, the closing costs amount to 2% to 3% of the home value.
The costs include the loan origination fee, points, homeowner's insurance, appraisal fee, lawyer's fee, recording fee, mortgage insurance (if the down payment is less than 20%) and others.
Mortgage Insurance protects the lender against financial loss if any homeowner is unable to repay the mortgage loan. In such a case, the house is under foreclosure. The mortgage insurance companies have to pay the lender's claim on the defaulted loan.
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