to buy your next home with no money down!
difficult economy where stock valuations are questionable, one of the
best investments is real estate. But for many potential buyers, a down
payment keeps them from considering this all-important purchase. This
should not be the case. It is possible to buy a home with nothing
down—meaning no down payment.
The method of purchasing a home with no down payment that most people
are familiar with is through the Veterans Administration or VA. This
benefit is available to active and retired members of the military
service, veterans, POW's and MIA's and their unmarried widows. All
branches of the service are included.
$10,000 Down Payment
opportunity for many potential homebuyers to purchase a home with no
down payment is through a down payment gift program. Gift down payment
programs of up to $10,000 or 5% of the purchase price, whichever is
lower are never repaid. They are a truly gifts.
programs are open to all homebuyers. There are no income limits and the
home purchasers do not have to be a first-time homebuyers.
Homes that are eligible can be located anywhere in the United States.
It can be used on any owner-occupied, primary residence including:
homes, condominiums, town homes and manufactured homes. Although it
cannot be used for investment or rental properties, duplexes and
four-plexes are eligible if the purchaser will reside in one of the
need not be pre-owned to qualify for the program. Newly constructed
homes are also included in the program.
The gift funds can be used on any FHA or HUD loan for the down payment.
Although HUD loans are based on need; FHA loans are not.
are available to most borrowers and are primarily restricted by the loan
amounts. FHA loan maximum amounts vary from state-to-state but are
generally higher than the median price of a home in their areas. Each
year the FHA maximum allowable loan amounts increase, so it is best to
check with your lender on the current amounts available. FHA does permit
down payments gifts in their loan consideration.
restriction on the down payment gift funds is that they may not be used
to pay off any kind of debt or judgment. They must be used for the down
payment of a home.
homes using the gift down payments fund the program. In exchange for
finding a purchaser for their home at their full asking price, they
contribute a portion of the proceeds from the home to a "pool" of funds
that is used to provide gift down payments for others purchasers. And
because all homes must meet FHA or HUD appraisal guidelines, homes are
never overpriced and must meet all repair and condition requirements.
Down payment programs can move many people into homeownership without
the necessity of a down payment. There are two other methods of seller
participation that also can accomplish the same goal: owner financing
and lease/purchase agreements.
glut of unsold homes increases, many times sellers are willing to carry
part of the burden to sell a home quickly. There may be additional
pressure on sellers of used homes when they compete with builders in
their area who fund down payments on their new homes. Sellers may agree
to a lease/purchase or owner finance plan to sell a house. In both
cases, the purchaser does not pay a down payment to acquire the house.
Although these allow a homebuyer to purchase a home without a down
payment, these programs can be good and bad for the purchaser and should
be approached with caution.
any legal transaction, you should use a standard legal form.
Lease/purchase forms are obtainable at most major office supply stores.
Owner financing contracts are not readily available and will have to be
drafted by an attorney.
In the case of lease/purchase agreements, the seller agrees to a price
that he will sell the house for at some future date and the buyer
usually pays a monthly amount several hundred dollars more than what the
home would receive as a rental. Depending on how the agreement is
written, this additional money can be "down payment" savings plan. A
portion of the additional money can be returned to the buyer when the
house is sold and used as a down payment. If the buyer decides not to
buy the house, all additional moneys are forfeited. If the buyer decides
to complete the transaction he would secure a mortgage from a lender.
These arrangements are similar to those in owner financing except in
that case the seller is the lender.
two areas of concern for the buyer with these types of purchasing
options. In both cases, because the buyer is not paying a mortgage
company he does not receive any of the tax deductions for the interest
on the house payments. This may be an acceptable trade-off for the
ability to purchase a home without a down payment. The second area of
concern requires more judgment. Because the buyer is paying the seller
each month instead of a mortgage company, if the seller were to go
bankrupt or lose the home in foreclosure, the buyer's entire investment
might be lost.
But on the
flipside, there have been several occasions where persons have entered
into lease/purchase agreements and then found purchasers for the homes
at amounts much greater than the selling prices contractually agreed
upon. The leasees bought the houses from the sellers and then resold the
houses for a large profit in the same day.
House Trading/Lines of
professional investors acquire homes with no money down by trading one
property for another. In some cases, they trade one large property for
several smaller rental properties. Or they trade houses in different
cities to acquire a vacation or retirement home. Property trading is
also a legal way to avoid the capital gains associated with selling a
Another way to acquire a property with no money down may be with a line
of credit secured by the equity in another property. This allows the
homeowner to purchase another property using the accumulated equity in a
home without selling the original property.
first-time homebuyers, the office of Housing and Urban Development (HUD)
offers special financing for first time homebuyers. This program is
based upon need and is designed to allow low-income families to obtain
their first home without a significant down payment or closing fees.
HUD foreclosure homes require no down payments. Many HUD foreclosures
as well as bank and other foreclosures can be found at
Rural Homes/Cops in Neighborhoods
federal government has two programs to help farmers and police personnel
acquire homes with nothing down.
For those with limited income who wish to live in rural areas, the Rural
Economic and Community Development Administration offers farmers home
loans with nothing down. Monthly payments may be subsidized and the
interest can be as low as one percent.
To encourage police to occupy homes in crime-targeted areas, special
federal programs permit police officers to purchase homes in selected
areas with nothing down. Information is available to law enforcement
officers through their places of employment.
With so many methods available to obtain homes with little or no down
payment, the goal of home ownership should be achievable by almost
everyone who desires it.