Is it good to buy a home with no down payment?
Most home buyers usually turn to home mortgage to help with the home buying process. And lenders may demand a down payment for approving a home mortgage. Home mortgage without down payment is also possible. It is the home buyer’s responsibility to decide whether to say yes or no to down payment. The home buyer should be fully aware of the pros and cons of down payment.

It is always difficult to save a huge sum for down payment. Age, income, debt load are some of the factors that affect saving money for down payment.

Down Payment and Interest Rates
Some lenders tend not to approve home mortgage if 20% down payment is not made. But there are some lenders who offer home mortgage with little or no down payment. No down payment home mortgage is helpful to buyers who prefer not to make down payments. They are saved from the burden of saving a large amount for down payment.

But if down payment is not paid, interest rates may be high. The reason is that lenders see more mortgage defaulting among borrowers who pay no or less down payment. High interest rate is a cost that a home buyer has to incur for not paying down payment.

Down Payment and PMI
If you do not pay down payment, then you have to buy private mortgage insurance (PMI). If the down payment is less than 20% of the home mortgage, PMI becomes mandatory. PMI protects the lender form home mortgage defaulting by the home buyer. PMI amount is dependent on the sale price of the home and the down payment a buyer makes. Lower the down payment higher is PMI

But later if you have acquired 20% equity on your home through mortgage payments you can cancel the PMI. This is because once your mortgage reaches 20% equity on home, lenders see low risk of you defaulting your home mortgage. Regular mortgage payments help you to cancel PMI once you reach 20% equity on your home.

Down Payment and Total Cost
If you pay no down payment, then your home mortgage comes to you with an extra cost that includes higher interest rates and PMI. To avoid these extra costs sufficient down payment helps.

It is in your interest to make good down payment in order to save on those extra costs. Moreover your repayment process will also be easier.

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