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100 Percent Financing

For the novice home buyer or the inept financial consumer, home loans, mortgages and residential loans can spiral into a whirlwind of confusion. Though most consumers are familiar with the conventional and conforming loan, the edgier | more innovative loans that have popped up within the mortgage industry can prove a little overwhelming.

Perhaps the name, 100 percent mortgage program, sounds a bit egotistical. However, it is an authentic mortgage classification, under which a host of mortgage plans are listed. Of course, not all 100 percent loan products employ the same terms or offer the same benefits. Yet, all 100 percent mortgages do have several elements in common.

To understand how 100 percent mortgage financing works, the following requirements for the prospective borrower are necessary: 1) nearly perfect credit 2) cash reserve in place for the settlement.

Apparently, due to regimented requirements, the 100 percent mortgage excludes a large percentage of the general population. Simply put, most middle class families or other individuals will flat out not qualify for this type of loan.

Yet, from the perspective of the lending institution, the eligibility criteria make perfect sense. As a mortgage with either a little or zero money down can be moderately to extremely risky, the risk factor is equated into the value of the mortgage product. For those then who meet the qualifications of a 100 percent loan, they are in a prime position to receive a significantly higher quality product.

From the perspective of the borrower, the advantage of the 100 percent loan is that it does not necessitate him | her to plop down any cash whatsoever in advance of closing the deal. On the mortgage company’s part, though there is a heightened sense of risk since the borrower does not use their own money as a down payment, their fears are mostly alleviated due to the fact the borrower has impeccable credit.

In summation, 100 percent mortgage financing is ideal for those individuals or partnerships desiring to purchase property as an investment. As the monthly payments and interest rates are higher than those of fixed or adjustable mortgage loans, the advantages of retaining one’s cash, as well as, increased equity outweigh the negative factors of having to make higher payments.