How To Buy A Home With No Money Down
Buy a home with NO money down? Really? Yes, it actually can be done…we will show you how some folks do it. Of course, those are the ones who like living on the edge, one accident away from bankruptcy.
Step 1: Credit Check
Missed car payments, late fees from your credit card company, and that medical bill that went into collection never seemed to bother you before. You could check your credit for free online to make sure it's good enough to get a mortgage. You can check your credit history on www.AnnualCreditReport.com once a year for free. And, if your history needs some help, there are some services out there who specialize in helping fix bad credit histories. A quick internet search will give you scores of them.
Step 2: Go For Broker
Call a mortgage broker who deals with many lenders. These real estate finance finaglers can manipulate the numbers way better than you can. They've got lots of "zero down" options. Sure, these guys typically get paid by the lenders, so if they happen slip in some extra fees - who cares! It's just another cost you get to add to your already swollen monthly payment.
Step 3: Ask Uncle Sam
Federal, state, and local government programs exist to help people get into home without a down payment- if you qualify. The largest government programs include those backed by the Department of Veterans Affairs (known as VA loans), the U.S. Department of Agriculture (or USDA), and the Federal Housing Administration (of FHA). So, if you're a US veteran or spouse of one, check out the VA loans. If you're buying a house in a rural community, look into USDA loans. And if you have good ordinary income and credit, then research FHA loans as they are the easiest to secure.
Step 4: Down Payment Assistance Programs
DPAP's, or down payment assistance programs are non-profit and for low-income borrowers.
Ask your realtor for help tracking some of these programs down.
Step 5: Piggy Back Loans
Instead of one mortgage, try two. With a "piggy back loan," you can pay for the house and get a home equity line of credit to cover the down-payment and closing costs you never paid for!
Step 6: Private Mortgage Insurance
Now you might be asking yourself, isn't this risky? Not if you get Private Mortgage Insurance, or PMI! Your lenders will be lulled into a false sense of security with your zero down plans. And if you default- the lender is covered by insurance. PMI might cost more, but that just means you get more bills each month, and that means you are really popular, right?
Typically, the premiums are $45 - $65 per $100,000 borrowed.
Step 7: Creative Solutions
Still can't find the down payment? Well, try asking the seller for help. You'd be surprised how accommodating some sellers are to make the sale. Some will take a promissory note from you in the amount of the down-payment to the mortgage company. Of course, you are still in the red up to ears, but it is another idea.
Talk to Mom and Dad and see if they can't give you the down payment and take it out of your inheritance. Take an extra job.
Or, why not wait a few years? If not, look for a less expensive property where you can afford the down payment or wait until the off season (Nov - Dec, & July - Aug) to look for houses, when the prices might be better.
Step 8: Cover Your Butt
Insure yourself for disability, medical, home, earthquake, liability. It'll make the lenders love you more. You'll pay tons every month, but at least you didn't punk out like those other fools that actually put cash down up-front.
There are ways to get a home with no money down, but they are VERY risky. One misstep, one mistake, one accident, and you could end up sleeping on a nice comfy cardboard bed under the overpass.