100% Financed Mortgage Loans: A Viable Option Even With Bad Credit

No-one will argue with the fact that raising the necessary funds to buy a home is a difficult undertaking. But trying to do so with bad credit scores to your name is even more difficult. What not everyone knows is that 100% financed mortgage loans are available even when bad credit is a factor in the equation.

For current renters, this is welcome news, allowing them an opportunity to become homeowners despite their imperfect financial situation. But how can approval with bad credit be possible when a typical mortgage is so high?

There are good reasons why some lenders are willing to grant a mortgage loan. What must be remembered is that no lender is out to lose money, so their offers are calculated to benefit them too. Here are some factors that should be considered when contemplating buying a home.

What is 100% Financing?

The idea of 100% financed mortgage loans might seem a little strange, but there is nothing to be suspicious of. Usually, buying a property involves making a down payment and paying off the rest with a mortgage. What 100% finance means is that no down payment is required.

It is even possible to get 105% financing, with the extra 5% used to cover the closing costs of the property deal. Between legal representation and other costs, the fee on top of the property price can be $10,000 to $30,000, so approval with bad credit can prove expensive.

However, there are certain conditions that need to be taken into account too. For example, the interest charged on a mortgage loan can be quite high, and the interest structure quite complicated. So, some planning and research is required before advancing with the application.

Advantages of 100% Financing

Despite the associated costs, there are some real benefits to seeking 100% financed mortgage loans. The most obvious comes with the fact a down payment is not needed. This means there is no need to spend time saving as much as $20,000 in cash.

Another is that private mortgage insurance does not need to be paid, as it is covered by the interest rate. This rate is going to be much higher than normal, but works out as being beneficial overall – not least because those who arrange this insurance separately end up tagging on a fee too.

Of course, a key benefit is that, in getting approval with bad credit, the chance to buy a home becomes a reality. This alone makes whatever negative aspects that might be associated with the mortgage loan covering the total price of the property may come with.

Disadvantages of 100% Financing

There are a few disadvantages to getting 100% financed mortgage loans. For example, even with no down payment to worry about, the overall cost of the mortgage can be higher. With a $200,000 property, a $200,000 mortgage repaid over 30 years costs more including interest, than repaying a $180,000 mortgage after a 10% down payment.

Bear in mind too that because the applicant gets approval with bad credit, the interest rate is higher. This means the full repayment sum for the term of the mortgage is going to be very high. What is more, the rate is adjustable rather than fixed, which means the repayments can increase dramatically in time.

Finally, by using a 100% mortgage loan, the buyer starts with zero equity. Normally, the equity is represented by the size of the down payment. And with no equity, there is no security should a loan be required in the near future.

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Are You Ready for Start-up? Financing: 8 Cons & 5 Pros – From a South African Perspective

Almost every entrepreneur has a start-up financing horror story, how the banker giggled while reviewing the business plan. Because of experiences like these, entrepreneurs often assume that lenders and investors lack either money or good business sense to know a good deal when they see one. But the real reason that most entrepreneurs cannot get financing for their new business is they are just not ready for the money. In other words, if they received the money today, most entrepreneurs would spend it without any long term positive results. Being ready for start-up financing means having a plan for spending the money wisely and being able to prove to others that they will follow it. failing to convince potential lenders and investors that they can add value to their business using these peoples money is a surefire way to be rejected. Here are some of the reasons why entrepreneurs fail to get start-up money:

1. Poor communication: Refers to inadequate description of the business.

2. Insufficient sales and marketing strategies: Remember the old adage: ” Nothing in business happens until someone sells something.” Investors like to see about 30% of a business plan devoted to marketing and selling.

3. Ignoring the negatives: Every business venture faces threats and problems. Investors get nervous if an entrepreneur cannot explain them.

4. Over-emphasis on the product or service. A common tendency of entrepreneurs is to fall in love with their product or service concept. Spend time in selling the entire business concept.

5. No assumptions for financial projections.

6. Insufficient evidence of the market.

7. Failing to know how much money you need.

8. Failing to set yourself and your business apart from the rest.

What can you do to prove you are ready for the financing you need?

1. Your business plan must explain the business, not just the product or service and its competitive advantage.

2. Your business plan must show that you understand the power of the bottom-line, providing a way to pay back loans or produce an attractive return on investment.

3. You must have a clear strategy for marketing your product or service and know what it will cost to make or provide.

4. You must show exactly how you will use the money to meet your company’s goals.

5. You must prove that the business concept will work, that customers will buy your goo

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