The No Down Payment Shuffle
There is a way to buy a house with no down payment in today's market place but it is very hard on all involved. The only way to buy a house using a mortgage is looking for homes that qualify under the Farmer's Home Loan Corporation.
This means the house must be out on the fringe of suburbia and the buyer can purchase a home with 102% financing with the seller paying up to 6% of the closing costs.
This is a phenomenal program. It has several restrictions. You must have fair to excellent credit. You must not make too much money. You must have a current job that intends to keep you and you must find a house that will appraise for the "real" values of today and not what was three or more months ago.
There are ways to purchase a home with no money down. Leasing with an option to buy is the most common today. Another way is to find a desperate seller who will allow you to take over payments. Neither of these are real safe because you must make sure that the seller makes payments so as not to cause a foeclosure AND It is very important to know that the Mortgage is not more valuable than the house itself.
These methods are not for the inexperienced. It is very important that you work with someone to check these things out and minimize risk.
Now, no down payment means the lenders will be taking on a big risk. Our recommendation is that you find a way to come up with at least 3%. Some lenders are saying that they will not lend on properties that do not have at least a 10% equity position available to the purchaser. This means you will need 10% down.
There are ways to get the 10% but it could take time. You also have to decide if you can sell your stamp collection, jewelry, inherited stock etc. There are programs that allow you to receive gift funds. These require the gift funds to come from a family member under most circumstances. Conventionally the lenders required 20%. FHA requires only 5%. Usually you will need something for your closing costs. In both cases, the seller can pay 3% to 6% of your closing costs.
If you have a 401k or other retirement savings. You can borrow from it. If you have a trust with funds set aside for you you can borrow it or receive these funds. We are required to paper trail all funds that flow to you.
Any funds that do not have at least 30 to 60 days seasoning in the bank, we have to define and demonstrate and explain where the money came from. We must show bills of sale, transfers from whom, letters of why the funds are transferred now and any other prudent requirement of the underwriting/funding source.
If we all brought down payments to the table we would all be better off in the long term. However, if you do not have a down payment to work with, get prepped.
Get with a professional like us and we will help you strategize and know your options. After all this is what our Freedom is all about, bucking the systems, having options, and making things work outside the box.
There are always options. They ussually involve time and strategy before you find success. Nevertheless, Success is always out there to be championed if you want it bad enough and so is the down payment. No down does not mean no way.
No Down Payment