Buying a house with no money down is possible, and it happens across the nation every day.
Learn how to buy house with no money down by using government, commercial or private lenders
A lot of people wonder about buying a house with no money down or if this is even possible.
Yes, it is possible. Yes, you can do it. Yes, it happens across the nation every day. Here are several ways you can do it.
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The Veterans Administration offers loans to the military, honorably discharged veterans and surviving spouses of veterans. You will need suitable credit to get a mortgage if you’re buying a house with no money down.
The VA actually guarantees the loan to a commercial lender. This VA guarantee does make the application process a lot faster and smoother too.
The United States Department of Agriculture actually makes home loans. In a report on buying a house with no money down, Zillow explains the process and links to the application site.
“Most of the loans are designed to help low- or moderate-income people with decent credit buy a home in a rural area,” states the website.
Don’t let the low- and moderate-income requirements bother you. These limits are set based on income for the area. What qualifies as a high income in one place may be a low income in another. The income limits are pretty generous too.
Zillow reports one of the two USDA loans, “helps those with incomes that are below 115 percent of the median income for the area buy modest homes in rural areas.”
The “rural area” requirement should not be a major concern either. The USDA’s definition of “rural” is quite broad.
HOMEOWNER HELP PROGRAMS
Most states have a program that helps people buy their first home. Many times this is a forgivable loan for a down payment. These are also aimed at low to moderate-income neighborhoods. Again, what defines such neighborhoods varies widely across every state.
People who wonder about buying a house with no money down often find these programs by going to a community service agency, city hall or the courthouse.
If you are approved, the program tells you how much money they will “loan” you for the down payment. Then, you go shopping for a house with a mortgage payment you can afford and a down payment with the program limits. You apply for a conventional mortgage. The bank will consider the program’s money as your money, not a gift.
GET MONEY FROM ANOTHER SOURCE
The Federal Housing Administration (FHA) offers mortgages with as little as 3.5 percent down. Yes, that’s a down payment, so it’s technically not buying a house with no money down.
However, unlike many other conventional loans, the FHA doesn’t care where that 3.5 percent came from. It can be a gift.
If you have relatives with money, they may be willing to give you enough to reach that 3.5 percent mark, possibly more. You may be able to work a personal loan with them as well.
Writing for The Motley Fool, Matthew Frankel, tells people how to buy house with no money down. He does point out that buying a home with the low-down payment FHA loan locks you into keeping the home for at least 11 years. These also have mortgage insurance requirements.
“Personally, I’m not a fan of FHA loans. I thought they were a good option up until a few years ago when premiums started rising dramatically, but now they’re just too expensive. If an FHA loan is your only option to buy a house, you may be better off renting and saving money toward a larger down payment,” he wrote.
Borrowing the down payment from another lender is also an option. Since mortgage down payments vary from the 3.5 percent on the FHA loan to as much as you can afford, you need to figure the cost of the mortgage payment and repaying the loan you took out for the down payment.
HOMEOWNER HELP FOR BUYING A HOUSE WITH NO MONEY DOWN
Best of all is to buy the home direct from a homeowner if you’re interested in buying a house with no money down.
You and the person selling the house negotiate a mortgage. You two decide how much down is required, hopefully nothing. You two decide what the payments, insurance and tax requirements will be.
If you do choose this route, be sure to have a professional prepare the mortgage paperwork and provide a title and background check. You don’t want to start buying a house and then lose it because there’s a lien the owner didn’t tell you about.
Make sure the deed is recorded at the courthouse too to make sure the house can’t be sold out from under you. The real estate professional should take care of this for you.
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