Is 100% Financing a Good Idea?

Posted by Florida Realty Marketplace on Wednesday, July 14th, 2021 at 8:00am

Is 100% Financing a Good IdeaFinding the right financing program for your new home can be just as important as finding the right home itself. 100% mortgage financing is a popular option, with a lot of misconceptions and questions surrounding the products that are available to you. Let's take a look at some of the pros and cons of 100% financing to help you further understand if this is a worthwhile option for you while searching for homes for sale in Groveland, FL

There's no such thing as 100% Financing

The idea that you could get your entire home purchase financed is incorrect.   The mortgage industry originally got in trouble by offering nearly 100% financing back in 2008.   While restrictions have been loosened since then there isn't any true 100% financing options.   However, there are plenty of "nearly 100% financed options that are worth looking at.   We highly recommend consulting with our team and an experienced loan officer before making a decision on these. 

Pros:

Easy Home Buyer Entrance

If you’re looking to become a homeowner for the first time and don’t have a lot of liquid funds saved, 100% financing can be a great option to get you into the game. With a small amount of money you can cover closing costs and not have to worry about down payments making you house poor (spending all of your money on a home and having nothing left in reserve). Utilizing a 100% financing option even if you have money saved can also give you a safety net in case of any needed repairs, maintenance, or simply security for what life can throw your way. 

Great Investor Returns

For those looking to buy for investment purposes, investing as little as possible up front can theoretically provide greater returns along the way. This is especially beneficial when you will be generating consistent rental income from a long term rental and not worrying about extended “dead time” or time when the unit is vacant. While some lenders require investment properties to be secured with larger upfront investment, lower options exist and can make a lot of sense for the right type of property. 

VA Opportunities

Many of the homes for sale in Groveland Fl. are purchased by current and former military members. Those who have served in the military are typically eligible for VA financing that offers 100% financing with no down payment requirement. This program has helped millions of veterans and their families find a place called home. 

Cons:

Short Term Equity Considerations

The less you invest on your home in the beginning of the loan period, the longer it will take you to establish significant equity in your new home. While those who are committed to living in the home for an extended period of time shouldn’t be overly affected by this, short term buyers could run into issues with resale down the line. Make sure to consider how long you will be living in the home and what type of home equity plans (borrowing through a home equity line of credit, etc.) you have in the future when considering this type of loan program. 

Different Costs and Credit Requirements

Buying with a 100% loan program is not for everyone and some interested buyers may not qualify due to more strict lending guidelines. Often, credit scores of 720 or higher are minimum requirements for 100% programs, and the additional financed amount results in a higher monthly payment. Combine this with the higher interest rates associated with high percentage loans and you can see that 100% financing is not for every buyer. 

While every situation is unique and what is good for one buyer may not be good for another, 100% financing options have their place within the market and are perfect for some buyers. Keeping these programs in mind when comparing financing products will help you make the best decision when buying your next home. Without a doubt, staying up to date on what's available to you will help make your next financing decision as beneficial as possible for you. 

Even 100% Financing Isn't 100%

We covered this above, but it's important to note that even with true 100% financing, we're only talking about no down payment.   Earnest money and inspections will still be out of pocket. 

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