If you’ve ever wondered how to buy a home with no down payment, there are a number of ways you can buy a home with no money a down.
Each one of the sections below explains how it can be done:
- Buying a Home With No Down Payment at a Back Tax Sale
- Getting a Mortgage With No Money Down
- Borrowing Money for a Down Payment
- Buying a House for Zero Down With Help From the Seller
- Buy a Home With No Down Payment With Government Help
- Buy a Short Sale Home With a No Down Payment Mortgage
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Buying a Home With No Down Payment at a Back Tax Sale
Local governments around the nation depend on property taxes to fund their budgets. When those taxes are not paid, they hold tax sales.
There are two kinds of tax sales, a tax deed and a tax lien certificate. Check with your local tax authority to find out what kind of sale your community has and when the sales are held.
Tax sales put the property on the market for a tiny fraction of the fair market value of the house. Regardless of the sale, the end result is the same if the property is not redeemed (taxes paid), you own a house.
What you paid at the auction is the purchase price of the house. Some states require a foreclosure, but this is much less than what you paid at auction.
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Getting a Mortgage With No Money Down
If you’re wondering how to buy a home with no down payment and have a mortgage, you can do this, but doing so is not easy.
First, you must have good credit. What credit score is needed to buy a house with no money down? A zero-down mortgage through a conventional lender requires a credit score in the 700s. The higher your score, the more likely you will be to get a no down payment mortgage. However, it’s going to cost you a bit more than if you have a down payment.
The personal finance management blog Ready for Zero says this, “You’ll also have to be willing to pay a higher interest rate. The price you pay for having no ‘skin in the game’ is a mortgage rate that ensures that you’ll pay extra tens of thousands of dollars over the life of your home loan compared to borrowers who have down payments. You will also probably need to purchase private mortgage insurance (PMI).”
Just remember, you’re not stuck with that mortgage forever. You can refinance after you have built up equity in the house. That becomes your down payment in the refinance. If your credit stays good, you’ll be able to get an attractive interest rate.
Borrowing Money for a Down Payment
If you want to know how to buy a home with no down payment and you mean having no out-of-pocket expense, the answer is still yes, you can do this. There are ways to get down payment for house.
Borrow the down payment by taking out another loan. Good credit is always helpful. With good credit, you might get a signature loan, meaning there’s no collateral needed; the bank gives you the money based on your word that you’ll pay it back.
For those with less-than perfect credit, you may need collateral, like a vehicle or a boat, to guarantee the loan. Use this money for the down payment.
Make sure that your debt load, with the new loan, won’t prevent you from getting a mortgage. Go through a pre-approval process with a mortgage specialist to find out if this will work for you.
You may be able to borrow a down payment from relatives or friends. If you are a young person, just out of college and starting your independent adult life, your parents may be able to help you with a down payment. I recommend a written agreement, even if the money is a gift. That way there can be no argument later over that money.
Credit also recommends getting something in writing, “The person giving the gift needs to show on paper a clear ability for them to gift money to the recipient. In other words, a friend of the person giving the gift can’t make a deposit in the giftor’s account without getting a clear and concise explanation including a gift letter and subsequent paper trail with bank statements showing where the funds originated and where the funds ended up.”
Buying a House for Zero Down With Help From the Seller
People often ask, “How can i buy a house with bad credit and no down payment? How can I get money for a down payment in my situation?” Here’s how to buy a home with no down payment if you don’t have the best credit rating.
If the seller is going to make enough on the sale, they may be willing to lend a financial hand. This can be a straight loan, to be repaid over time, or the seller can carry a second mortgage for the amount of the down payment. This is not common, but it does happen.
Another way to involve the seller is owner financing. In this kind of sale, you buy directly from the owner. You make your mortgage payments to the owner, and you and the owner decide what kind of down payment, if any, you need. The two of you also decide how payments, insurance and taxes will be structured.
Buy a Home With No Down Payment With Government Help
Every state has a program to help people buy a house. Some programs offer forgivable down payment assistance.
The federal government also has programs to help, especially first time home buyers and veterans.
If you’d like to know more about how to buy a home with no down payment via one of these programs, I discuss them in more detail here.
Buy a Short Sale Home With a No Down Payment Mortgage
Here’s another method how to buy a home with no down payment. If you can get a no-down mortgage, consider buying a short sale.
A short sale home sells for less than what is owned on the mortgage. It often sells for a bit less that than the fair market value. That difference in the price could make up for the extra money you may spend on PMI and a slightly higher mortgage rate, at least until you refinance.
If you’d like to know more about distressed property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
Learn how to reap huge rewards from tax lien and tax deed investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.