Applying for a no down payment mortgage is indeed possible, but will it save you from the financial distress of paying your hard-earned cash for rent every month?
Our finance experts are here to clarify misconceptions or popular notions surrounding this type of mortgage.
Is a Zero Down Payment Mortgage Possible?
You already know that this kind of mortgage is possible. Additionally, it works similarly to the way you would get a mortgage.
However, there are differences, and one crucial piece of information most applicants confuse it with as discussed in the next section.
How It Works
First off, a no down payment mortgage does not mean you don’t pay a down payment to finance your home.
It simply means you won’t use your hard-earned cash to pay for the down payment. Allow us to explain in a 2-step process:
That said, no/zero down payment mortgages will not mean that you’re not paying for any amount. Put it simply, our lender funds both your down payment and mortgage.
On the other hand, if you’re wondering how does a no down payment differ from a mortgage, both are similar except for the fact that the only amount/money you’ll need to pay for no down payment mortgages are your standard closing costs.
Closing costs make up 1 to 2% of the total amount. Here are some forms of closing costs:
Although your lender handles the bulk costs, you still have to cover everything related to your closing cost–you should have at least 1 to 2% of your home purchase price.
Are You Qualified?
There are 4 conditions to look out for:
If you satisfy all the conditions mentioned above, then it’s for you. If not, we’ve outlined a few details in the next section below to help you out.
Important Reminders You Should Know
Education and finance go hand-in-hand for reasons that allow you to make smart, informed decisions in your life. Here are some reminders from our housing experts you take note of before applying:
Limitations on the Mortgage Lender
While it’s true you have the advantage of lenders funding the bulk of your cost, you can’t borrow/loan from just any lender. The Canadian government does not allow you to borrow or loan money from a lender that’s currently working in a bank or federal trust company.
Alternative Loan Solutions to Use as Down Payment
If you need down payment assistance, there are several alternative solutions for home buyers to use:
Improving Your Chances of Securing a Mortgage
For guaranteed approval, here are 4 ways to improve your chances:
Buying your first home is both rewarding and fulfilling. Not to mention, it improves your net worth significantly.
Before you do, make sure you aren’t drowning in debt first. Rushing to buy a home and stressing over piles of debt is a regret you don’t want hanging in your life.