If you are considering a zero down mortgage loan for your home there are risks you need to consider before borrowing. Zero down mortgage come in several varieties including 80/20 loans and straight 100% financing. Here are several tips to help you decide if a zero down mortgage loans is right for you.

Zero down mortgages allow homeowners who lack the necessary 20% down payment to purchase a home. The problem with these “no-money down” mortgage loans is that the interest rates are significantly higher than if you make the necessary down payment. Mortgage lenders justify the higher interest rate with the increased risk of lending to someone without a down payment.

Another reason that this type of mortgage can be too risky is that unless you’re certain that you’ll never sell your home you’ll wind up paying closing costs eventually. Because you’re already paying a much higher mortgage rate, paying your share of closing costs when you sell or refinance down the road results in paying thousands of dollars too much for the loan. No money down loans can be a trap for many homeowners that don’t fully understand the risks and lack of options these loans present.

There are ways around 80/20 mortgage loans. The Federal Housing Administration allows your down payment to come from a family member, trade union, or non-profit organization. There are a number of community and government programs that help first time homebuyers with the necessary down payment to purchase their homes. This help is available through your local city, county, or state governments and may have special programs available for teachers, firefighters, veterans, police officers, and minorities.

You can learn more about your mortgage options, including costly mistakes to avoid with a free mortgage tutorial.