Zero-Down Mortgages
Zero-down mortgages are another risky choice. These loans allow borrowers to buy with no money down. It gets a borrower into a home, but PMI is a given and any chances of acquiring equity in a home will have to come from rising market values — and that's not something every borrower can count on, particularly in the recent rate environment. It might be better to ask for a low-down-payment alternative, such as FHA financing, that allows a borrower to have some small amount of equity at the start.
Have you ever heard the term low-doc (or no doc) loan? The terms low-documentation and no-documentation refer to a particular kind of loan made to someone without a traditional income stream, such as a self-employed person. In these applications, lenders don't require borrowers to supply proof of income. Instead, they do a credit check and definitely charge more than they would a borrower with verifiable data.
The best uses for all the loan choices in this chapter are the ones mentioned previously. They're for sophisticated buyers who have better uses for the saved cash flow or specific investment targets that will allow them to offload their property before higher payments are triggered. If you don't fit the profile, think twice.
