mortgage shopping questions
My husband and I are mortgage shopping at the moment, in anticipation of
buying a smaller house than the one we last owned. Too much money going
toward mortgage, PMI, taxes taught us cheaper is better.
This time around we have 30% for a down payment in the price range we're
looking in.
The first lender we contacted mentioned he has a few 100% loan programs,
and said he'd work up some scenarios that would allow us to finance the
entire cost of the house and keep our down payment money to invest in
another way. He also said in these scenarios the monthly payment would
still be the relatively low number that we want.
I'm due to get the numbers later today. Meanwhile, I have a couple of
questions.
How is it possible for us to offer no down payment and still have the
same monthly payment we would have had on a loan that had 30% down?
What's the catch? How does the lender benefit from this type of loan?
Is it advisable to put no down payment on a house even when you have it?
The simple answer would be either that the costs are going to be picked
up elsewhere OR you are going to be paying substantially
less on the principal than you otherwise would (that is, you
may have an interest only loan).
You have to look behind the monthly payment to see what else
is happening. If for some reason he is offering a lower
interest rate than your other loan, logic would dictate that
if you asked him to go back to the same lender and ask for a
rate with 30% down you'd get an even lower rate--as well as
no mortgage insurance charge.
I'm always suspicious when anyone starts talking solely
about monthly payments. That variable is important for
purposes of determining if your cash flow will work in the
short term, but if you don't watch the other variables you
can get a real problem in the long term. For instance, if
it is an interest only loan, that would mean that the only
way you would build any equity is if the price of the home
itself rises, you start making additional payments against
the principal (which then means you no longer have the same
payment