Homes For Nothing Down Or Not

By Kaci Cooper, 23 Jan 20:19

Many people have the misconception that they can purchase a home with no money.

Buyers must pay for the home inspection, out of their own pocket, and lenders want fees for credit reports and appraisals before they will lend out their money.

FICO scores, earnest money, and those available to loan money will play a role in what loan products will work for you, however as far as the down payment is concerned, you may use gift money from parents or friends. It does not have to be money you have earned.

Remember that your closing costs are in addition to the financed portion of the home and usually add about 3% to the total home price. However, note that the majority of the country, due to the recent stock market decline, is a buyer’s market. Therefore many sellers throw in a deal of paying for the buyer’s closing costs. This is why it is a bonus to have a good real estate agent supporting you because a good agent can often write such bonuses into your contract.

Sometimes, once the preliminaries are out of the way, buyers can be refunded their earnest money, leave them with minimal costs. These are reasons to find a reputable professional to work with you in the home buying process.
Before buying, consider the following:
- Are you unsure if you can afford a house?
- Will you be more financially stable if you rent?
- Is an adjustable rate mortgage the only way you can afford a house?
- Do you plan on moving in less than five years?
- Is the market is rapidly declining?

If you answered yes to any of the above questions, you now have reasons as to why you should not buy a house. Regardless of your situation, make sure you are making the right choice at the right time.

If it is not the right time, you can give up the tax break every April and rent to own. However, if your situation financially does not look like it will improve in twelve months, then this may not be the best option. In the end, it is always best to discuss your situation personally with a financial professional.

Once you’ve made the decision to make the move, you should take some time to scope out your budget. This will show you where you have maneuver room and what you really need to buckle down on. Be sure to include every aspect of your life from necessities like laundry detergent and food to late night snacks at Taco Bell.

Here’s a sample budget for a 40-year-old man making $70,000 per year and living in a two bedroom apartment. His monthly pre-tax income is 5, 811.

Monthly Expenses Cost
Rent $1600
Car Payment $225
Credit Card Payments $200
Car Insurance $75
Groceries $400
Health/Renters Insurance $208
Electricity $40
Natural Gas $70
Cell Phone $49
Home Phone and Internet Access $72
Cable TV $50
Gas, Dining, and other $800
Water, Sewage, Garbage $100
Property Tax, Homeowner’s Insurance, Condo Fees $0
Lawn $0
Alarm Company $0
Total $3,889

This budget does not apply to everyone, but it will still give you an idea of what you need to be thinking of when making your own monthly budget. Make sure you include everything from fingernail polish to alcohol.

If your current mortgage costs $1400 then most likely you will qualify for a mortgage in the same range. Lenders make their judgments based on debt to income ratios. These show how much debt you incur in a month versus how much you make per month.

-Housing ratio: Loaners want your total mortgage debt and condo fees to not outweigh 30 percent of your gross monthly income; 28 percent is standard
-Overall debt ratio: Revolving monthly payments such as credit card payments, alimony, child support, utilities, etc. The standard debt ratio does not go over 36 percent.

These factors vary given the lender, but most lenders take the most consideration into your past history. This is why it is such a benefit to you to have good credit.
In addition to the mortgage payment, make sure you remember the costs of home purchase and ownership.

Make sure you keep some money in reserves. Many buyers make the financial faux pas of putting every cent into their purchase, but it is always wise to keep some money on hand for emergencies.

Tags: nothing down