Low-Down Mortgages

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DEFINITION of 'Low-Down Mortgages'

Mortgage programs which require a minimal down payment. Most low-down mortgages require a down payment of between 3\% - 5\% of the property value; however, some lenders have programs for 100\% financing (or 0\% down payment). Low-down mortgages are designed primarily for borrowers with a low to moderate income and first-time home buyers. Other borrowers elect to use low-down mortgages in order to use their down payment elsewhere. Low-down mortgages are offered through several sources, including state and local governments, the Federal Housing Administration, the Veterans Administration and individual lenders.

INVESTOPEDIA EXPLAINS 'Low-Down Mortgages'

Low-down mortgages have helped millions of lower income and first-time home buyers achieve homeownership. Some programs require the borrower to attend a brief borrower education seminar prior to obtaining financing. Borrowers who have a substantial down payment, but use low-down mortgages to use the down payment for other purposes add a layer of risk to homeownership. A careful analysis of the risks and opportunity costs, based on sound financial principals, should be run before making a decision to use down-payment capital for other purposes.

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