Beware of Zero Percent Down Mortgages
Whether or not you were old enough to understand debt and financial risk when the 2008 housing market crisis happened, you were probably dismayed to hear about the people who borrowed subprime mortgage loans and then, to no one’s surprise, defaulted on them. How could anyone be so unscrupulous as to lend huge mortgages to people who had no means to repay them? How could anyone have such unrealistic expectations as to take out a subprime mortgage loan and then just hope that their income would miraculously increase and mortgage interest rates would stay low? Desperate times are here again, if they ever left, and with them are companies advertising risky mortgage loans to people who want to experience the feeling of homeownership just this once, even if they know it will never last. Zero down payment mortgages, a creature of the subprime mortgage crisis, have reappeared, and if you are considering borrowing one, you should not do so without first consulting a Philadelphia mortgage foreclosure lawyer.
If You Can Afford to Stay Out of Trouble With a Zero Down Payment Mortgage, You Can Afford Not to Borrow One
If you had to place a 20 percent down payment to get a home mortgage, then only trust fund babies could afford to become first time home buyers. FHA mortgages and affordable home ownership programs allow much smaller down payments, but the idea of a mortgage without a down payment sounds downright frightening to the risk averse. Sure, every holiday weekend, car dealerships advertise zero money down sales, but if you sign for a car loan with no down payment and then quickly realize you have made a mistake, you can just drive your prohibitively expensive ride back to the dealership and get out of the agreement without suffering catastrophic financial losses. A house is a bigger investment.
Zero percent down mortgages in their current form aren’t really zero percent down. Instead, you borrow the down payment from the mortgage lender; it is usually three percent of the purchase price of the house. The down payment is an interest free loan, but you must repay it when you sell the house or refinance the mortgage. If you couldn’t afford a down payment without borrowing from your own mortgage lender, it means that you will be in even more debt when the whole endeavor goes belly up.
Is There Any Benefit to Borrowing a Zero Down Payment Mortgage?
Zero percent mortgages seem like a raw deal until you consider the alternative, which is renting. When you rent, you pay just as much as you would for a zero down payment mortgage, but instead of getting a tiny bit of equity, assuming that your financial situation doesn’t get even worse, you get nothing. It is a choice between big hope mixed with big uncertainty, on the one hand, or putting all your money into going nowhere.
Contact CONSUMERLAWPA.com About Staying Out of Trouble With Home Mortgages
A Philadelphia consumer law attorney can help you think clearly about zero percent down mortgages. Contact CONSUMERLAWPA.com to set up a free, confidential consultation.
Source:
cnn.com/2024/06/03/business/zero-down-mortgage-nightcap/index.html
