No money down loans or 0 down home loans mean exactly what they imply: they’re home loans where you don’t have to make a down payment. This may seem awfully nice at first, but there are many reasons why 0 down home loans aren’t a good idea. As many as 50 percent or more of foreclosures during the housing crash were related to 0 down home loans.
While the protypical 0 percent down home loan involves a single 100 percent mortgage, this can generate an enormous monthly payment. Not just because the whole amount is financed, but because if you make less than a 20 percent down payment you also need to pay PMI (Private Mortgage Insurance). To avoid private mortgage insurance, lenders made it possible to obtain a “piggyback loan.” This is also known as an 80 20 loan, where you get a second mortgage to pay the 20 percent necessary to avoid PMI on the first loan.
But such lending trickery is largely what led to the housing crisis, and these kinds of loans are now incredibly difficult to find or obtain. So how does one obtain a 0 down home loan these days?
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