The biggest roadblock when buying a home is often the down payment. Many people are prepared for the mortgage, property taxes, homeowners insurance, etc. But when it comes to saving money for a large down payment, most buyers find themselves at a loss. There are many ways to buy a home, even if you have little or no money to put down. Here are a few of the basics:
Sweat Equity is a way to get a home by trading work for equity in the house. This could be used for a down payment or purchase later. This is a great technique if you are handy with tools, yard-work, or paint.
Look for fixer-uppers in neighborhoods you are interested in. Many times these homes will have a hard time selling and the owner is ready for just about any offer. You will find these houses ranging from just needing a little “cosmetic” work like landscaping or painting, to run-down houses in need of some serious renovation. If you are into repairs, this is a great way to get a home for a good deal.
Look for a home with an assumable loan. Instead of buying out the owner’s equity, ask the seller to carry back a second mortgage for the rest of the money owed. If you can get the seller to carry all of the rest, and you can get a home for no money down.
Look for foreclosure properties that require little or no down payment. Some lenders and government agencies will let you buy a foreclosure with no down payment if your credit is good and they’re anxious to have the home occupied, or if you have skills (carpentry, landscaping or even painting) that you can use to increase the home’s value. Distressed properties – assume with little or no down to save foreclosure.
VA or Other No Money Down Loans
Look for conventional loan programs such as VA or FHA that require little or nothing down. VA loans have helped countless veterans get into their homes. There are often programs available to first time buyers or people who are in critical conditions (such as with Hurricane Katrina) that will help people get into a home with little money down. You usually will have to qualify for the loan with the bank.
Find an Investment Partner for Equity Sharing
Look for an investment partner who’ll put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.
Wrap-around financing is where you assume a seller’s VA Loan by doing a new Contract for Deed. Since this contract is flexible and does not have to follow the old loan, you can ask the seller to carry not only the loan amount but the rest of the purchase price of the house, letting you get in with little or no money down.
This is one of the best ways to get into a home of your own when you can’t get a bank loan. Remember, you may still have to get a loan down the line. If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house. You can use the time to fix your credit or use one of the other options that are discussed to purchase the house at that time. You can always try to negotiate another 5-year lease-option if you need more time.
Government and Community Down-payment Programs
There are many communities and non-profit organization programs out there to help people get into homes of their own. Many of these do not require any money down. Do your research to see if programs like this are available in your area. Some organizations and programs will pay for some or all of the down payment for you. Generally, these are for low to moderate-income individuals. You also usually have to be able to qualify for an FHA loan (which is somewhat easier than a conventional bank loan.)
If you have been unable to get into a home because you don’t have enough money for a down payment, then maybe one of these programs will be for you. The housing market can be a tough thing to crack into, but once you do, it becomes worth it in the end. Whether you’re buying a home for yourself or buying it to flip/rent, these resources are a great way of getting started.