This is a purchase transaction that would involve 100 per cent financing of the purchase price and seller assistance with the closing costs. The lender may view the financing from such a transaction to have considerable risk because the new homeowner literally has none of their own money invested in the home.Some people have actually gotten there real estate license so they can represent themselves when they buy there home. This allows them to pay for the closing costs with the commission. It is obviously a more risky way to purchase a home.
You may be able to accept a higher interest rate to help pay for your closing costs so that you do not have to come up with any money out of your pocket for closing costs when you are buying a home. So combined with a 100% loan or an 80/20 loan, you can obtain a mortgage and buy a home with no money out of your pocket.
Many lenders will allow the seller to pay between 3% and 6% of the buyers closing costs, this is known as a seller's concession. Some lenders will allow this money to be used to buy down the interest rate (pay points) or set up escrow accounts.
It is important to remember. In any 100% financed real estate transaction, the seller can only pay for Non Recurring Closing Costs. The borrower is still responsible to pay for pre-paid interest, all lender required impound reserves, hazard insurance premiums, and property taxes.
If the seller isnt' providing any seller assitance, it may be possible to get a loan that pays some of the closing costs for you. These are generally 103%-107% loans. These loans usually require a higher credit score, but the exta amount borrowered will help with closing costs.
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