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Buy a Home With No Money Down? It is Possible!
By John R. Blakefield
Saving for a down payment on a home can be very difficult, especially with the seemingly always increasing cost of living. Families with low-incomes are often devoting all their money to the necessities in life such as clothing, food and rent. Some families simply don't see a way out of paying rent to a landlord because buying a home is completely out of reach.
For many people, the option to buy a home as opposed to throwing the money away and not building equity in a home is one they are not educated in. Unfortunately, not everyone is aware of the options that have come about with the government wanting each American to have the ability or at least option to purchase a home. Purchasing a home is considered an American dream and today, more than ever there are opportunities for people to buy a home, even with no money down. Even with increasing home prices and cost of living, this dream is available to those people who are willing to get educated and talk to the right people.
So how do you purchase a home with no money down? There are a few different ways of doing it, and depending on your specific situation, one may be better than another.
Some lenders will offer you over 100% of the asking price of the property in question. For example, they may lend you $257,500 on a home going for $250,000. This is 103% of the purchase price the lender would be giving you. This money will cover a down payment as well as some closing costs associated with buying a home. You will have no equity in the home, and essentially be upside down on the house by owing more than the property is worth. However, if you are committed to paying the monthly mortgage payment on time and in full, you will slowly but surely build the equity back up in the house.
This option is good for those who just can not save up enough money for a down payment, but has income that can be put towards a house, rather than an apartment. You can negotiate the terms so that your monthly payment is comparable to the rent payment you are currently paying.
Another option a lender may have for you is a deal called an 80/20, in which the lender will loan you 80% of the purchase price and then make a home equity loan for the remaining 20%. Perhaps the percentage amounts may differ depending on your lender's available options.
This option is great for those who can not save up for a down payment and do not want to pay thousands of dollars on Private Mortgage Insurance, which is usually charged to those who do not have a down payment of 20% of the purchase price.
Why don't you purchase a home without taking out a personal mortgage your self? Another way of buying a house without a down payment is to assume an existing loan form a current home buyer that is selling the home. You literally take over the debt, as if it were your own, and make the monthly payments.
This eliminates high closing costs and usually keeps the interest rate low. Many people who really need to sell their home and who are motivated are likely to sell the home by having the buyer assume the debt. Pre-foreclosure homes are great places to look because these people are avoiding foreclosure and the horrible credit problems having this item on your credit history can bring. They will do anything to rid themselves the responsibility of the home, and by you assuming the mortgage, you are actually helping the home owner out!
Private Mortgage Insurance is a possible but often expensive option. If you have a down payment less than 20% of the asking price or no down payment at all, you can pay extra money as insurance to the lender that you will pay back the money loaned. This can end up being thousands of dollars, but yet still an option for those who wish to purchase a home. Just be sure you understand that you will be paying a lot more.
In order to find these mortgage and zero down payment deals, ask your local bank for references to lenders or check the yellow pages. Be sure to find lenders or brokers who are qualified with the proper licenses and verification as well as many references showing how well they have done in the past.
It is especially important to find honest brokers or lenders in this sort of deal, because there is more of a chance that zero down payment lenders will take advantage of the clients they claim to help. Not all of them, but just be sure that you are dealing with the real deal, not someone who is going to hurt your financial situation.
Zero down payment options have allowed many people who never thought buying a home was possible, a reality. You can too by performing some research and finding some options that will work for your situation. I recommend that you avoid paying Private Mortgage Insurance if possible, because it really is a lot of extra money that does not need to be spent. Find someone who is willing to work with you and put you in an affordable home that every person deserves to own.
About the Author
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage/.
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