Someone with bad credit will find it easier to get a "no money down" mortgage loan. Conventional lenders are less likely to agree to these deals than subprime lenders. But before you sign a mortgage contract, make sure you know what it says and that it's a good deal.
Pros of a mortgage with "no money down"
With a "no money down" mortgage, you can buy a house with little or no cash at closing. In essence, you're switching from paying rent to paying a mortgage, which makes the change easier. But you will have to pay more in interest for these terms.
By not having to pay closing costs, it is much cheaper to move out of a home. For example, let's say you pay $6,000 for your traditional mortgage at the end of the loan. You have to move for a number of reasons in a year. Even with a lower interest rate, you are still out that money. If you got a loan with "no money down," you wouldn't have to worry about losing that money.
What it Means for "No Money Down"
When it comes to mortgages, "no money down" can mean two different things. For some lenders, "no money down" means that you don't have to pay a down payment, but you do have to pay closing costs. Most of the time, closing costs are 3 to 6 percent of the loan amount, which is a couple of thousand dollars.
Other lenders talk about home loans that don't need any money, not even for closing costs or a down payment. Instead, closing costs are usually added to the loan's principal amount, up to 2% of its value.
How to Find Lenders with "No Money Down"
If you have bad credit, you should look for a subprime lender. You can find a lot of financing companies online, and many of them offer good rates. Check out a mortgage broker site if you don't know where to start. They are linked to a number of lenders, so you can get mortgage quotes in minutes. Then, as you find lenders, you can widen your search.
Make sure to choose "no money down" when you ask for a loan quote. This could involve checking a box or choosing a certain loan term. Just make sure you know what "no money down" means for each lender before you choose a financing plan.
