Florida Mortgage Advice: Avoid 100 Percent Financing At All Costs

If you’re in the process of buying your first home you may be having problems coming up with the cash for a down payment; therefore, you may need for private mortgage insurance. Does this mean it’s a good idea to take the 100 percent financing route?

According to Don Taylor of Bankrate.com, no, this is almost never a reasonable option. He advises against 100 percent financing and dividing your investment into two Florida mortgage loans.

Here’s what Taylor has to say on the matter:

I think a no-equity 80/20 piggyback loan should be avoided if at all possible. Being able to make even a small down payment of 5 percent in an 80/15/5 structure gives the lender of the second mortgage a bit of a cushion, allowing you a slightly lower interest rate.

Being upside down in a car loan is one thing; being upside down in a home is quite another.

When you don’t put any money down, you’re counting on rising Florida home prices to build your equity position in the home, at least in the early years of the mortgages. If you’re forced to sell, you may not get enough at closing to pay your Realtor and your mortgages.

Homeowners don’t like paying private mortgage insurance, or PMI, because they’re paying an insurance premium to protect the lender. But those premium payments don’t last forever, and PMI allows buyers with less than a 20 percent down payment the ability to buy a home with one 30-year, fixed rate Florida mortgage loan.