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No money down doesn't mean you don't need any money!

By
Mortgage and Lending with Competitive Insurance of Dundee

I've done tons of home loans for First Time Home Buyers and have done most of them with very little money out-of-pocket from the buyers.  It's important to understand that even with 100% financing, which is difficult to structure these days, there are still closing costs, pre-paids and reserves to contend with.

Closing Costs - Beyond the cost of the home, buyers are responsible for paying an underwriter, mortgage broker, property appraiser, surveyor, title company, state and county taxes, recording fees, inspectors and credit reporting companies to name a few.  Sure, the buyer can pay some or all of these to sweeten the deal, but these are costs to consider.

Pre-paids - These are things that need to be paid before we can close.  These are items like a full year's homeowners policy, the loading of escrow accounts and whatever pre-paid interest is required.

Reserves - Probably THE most important of the three.  Basically, reserves are what money is available in case of a mishap or emergency.  Financially responsible borrowers have a few house payments set aside in case of a serious auto accident or a job lay-off or other unexpected occurrence.  The last thing a lender wants to here is that there won't be a nickel left after the moving van is paid for. 

A good mortgage broker like me can show you how to best present your loan if a cash deficientcy is an issue, but money in the bank is a great idea, even if you don't need it!

For mortgages in Florida and Georgia, call Randall at 863-604-0169

Keith Pound
EXIT REALTY CRUTCHER - Louisville, KY
Realtor, Auctioneer - Louisville, KY - 502-645-5950

Thanks for sharing, I have worked with some 1st time buyers this year that have been pre-approved by the loan officer for loans, but didn't understand they needed cash to close. It was difficult and they did come up with the money, it would been nice to say "show me the money" first.

Dec 29, 2008 12:23 PM
April Link

When deciding to buy a home, cost will most likely play a major role in the type of property you purchase. The following provides a few considerations for waffling home buyers.

Purchase Price: If the price tag dictates options, more of a condo might be better than less of a house. Perhaps a newer condo falls into the same price range as an older house.

• Ongoing Costs: Choosing a condo might make for a smaller mortgage, but it involves monthly condo/assessment fees, which could bring the total monthly bill up significantly. Alternatively, the house will need continuing maintenance, which while irregular, certainly isn’t free.

• Insurance: Homeowners insurance adds yet another expense to the bill. Condo owners often pay this inclusively with their monthly assessment to the association. However, most often this only covers shared spaces and building systems. Consequently, many people also opt for an additional policy to cover the inside of the unit and their belongings. House owners must pay monthly either through the mortgage payment or on their own.

Jan 07, 2009 06:20 PM