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Is it wise to take on a zero-down mortgage?

Most Minnesota residents want a home of their own. Unfortunately, this life goal is difficult for many people to achieve. Coming up with enough money to make a down payment can be particularly challenging. For many, the solution to this problem is to seek out a mortgage that requires no down payment. Examples of no-down-payment mortgages include Veterans Administration (VA) loans and other government programs.

Is taking on such a mortgage wise, or is it pure folly? The best answer depends on you and your financial situation. You can find out if you should take a zero-down mortgage by consulting with an experienced attorney. In the meantime, review the following information about whether a zero-down mortgage is wise or unwise.

According to one financial website, there are more downsides to these mortgages than there are upsides. The major benefit of paying zero down is that you get to enter a new home with virtually no expenses. Below you will find four possible disadvantages associated with zero-down mortgage options.

  • Most no-down-payment loans mean that you will pay higher interest rates
  • Most of these loans mean that your mortgage payments will be high
  • If the housing market suffers a downturn, you may end up owing more than your house is worth
  • These mortgages do not allow you to have home equity right away, which means that you may not qualify for a loan if a disaster strikes your home

Talk with a real estate lawyer before making your decision about a zero-down mortgage. Your attorney may be able to point you in the direction of other mortgage options that are both affordable and wise for the present and the future.

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