Is it dangerous to get a 100% Loan?

2 Replies

I've heard that you could be getting yourself into trouble by purchasing property with 100% financing. Is this true? What are the up and downsides of such a loan?

Check for appreciation in the area. Less than 5% may get you in trouble. Remember that 100% is based on the purchase price not the appraised value. So if you are purchasing a house for $100,000 and it appraises for $110,000 and you mortgage $100,000 than that is a 100% loan but you already have almost 10% equity built in. 100% loans are great tools with the right property. Please call or email if you have any more questions.

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Originally posted by "NateRoman":
I've heard that you could be getting yourself into trouble by purchasing property with 100% financing. Is this true? What are the up and downsides of such a loan?

Risky? Why? You have the banks money. The bank is the one as risk, not you. 100% financing is actually pretty good, as long as you can afford the payment. If I had my choice between buying a home with 5% or 10% down, and doing a 100%, I would always chose the 100% financing because that allows me to keep my 5% or 10% and continue earning interest off of that 5% or 10%. At the same time, that 5 or 10% could stay in my account as an emergency fund. If for some reason I lose my job, I can rely at the 5% to make my mortgage payment while I look for another job.

David

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