Obviously, homes cost hundreds of thousands of dollars but what does it cost you right now… Up front… Out of pocket?
You may have heard from realtors or lenders in the past that it costs $10,000, $20,000, or even up to $30,000 or more to buy a home these days.
But how many of us really have that kind of money laying around?
Especially if you’re not selling another home first before moving into a new one.
The Truth About Loans
Well it might be a surprise to you that there are loans that do not cost tens of thousands of dollars to get.
In fact, there are 6 different home loans in particular that we’re going to be going over in Part 2 of this series.
Plus, we have a bonus secret for you on how to get somebody else to pay your closing costs.
So before we get into details, here are the 6 loans or loan programs we’ll be going over:
- Local DPA’s
Now I know you’re thinking, “I don’t want any goofy adjustable rate, garbage backed, off the wall, crazy high interest home loan” and you would be absolutely in line with that kind of thinking.
These home loans are all fixed rate loans meaning your interest rate will not change.
They’re also government backed so you know you’re not giving money to some fraud ridden organization.
These are all safe and secure options for getting into a home with little to no down payment.
Loan Option #1: FHA (Or Federal Housing Administration) Loans
The FHA loan is probably the most widely used loan that we have today.
It is a fixed rate, government backed home loan that allows you to buy a home with just 3.5% down payment!
When you compare that to a run of the mill, conventional home loan that requires 20% down payment, you can see that 3.5% is very reasonable.
Where this loan really shines is the fact that you don’t even have to pay the down payment yourself.[password-protect]
If you have a friend or a family member that is willing to help you out, they can “gift” you your down payment [/password-protect]which essentially makes this a zero down payment loan!!!
Loan Option #2: HomePath Financing
The HomePath loan is a conventional home loan option through Fannie Mae.
The biggest down side to this loan is that you can’t just buy any home you want. It can only be used on a foreclosed Fannie Mae property.
If the home that you fall in love with happens to be a Fannie Mae foreclosure, and there are LOTS of them, then you’re in luck.
This loan is much like the FHA loan with a couple small differences.
First, the down payment for this loan is only 3% making it a little bit lower than FHA’s 3.5%. While one half of a percent seems small, this calculates to $750 on a $150,000 home.
I don’t know anybody who wouldn’t want to keep an extra $750 if they could.
Another difference is that there are no appraisals with this loan meaning a lot less headaches and another $500 back in your pocket.
Home Loan Option #3: The VA (Veterans Affairs) Home Loan
If you served in the the military then I first want to thank you for your service!
Second, I want to tell you that you qualify for probably the best zero down payment loan option available.
The VA loan is only available to current active duty military members and veterans of military service.
It is a fixed rate, zero down payment, government backed home loan.
It is a lot like a conventional, 20% down home loan except that the government guarantees that 20% for the banks so they go ahead and give you the loan without a down payment.
Your monthly payments will be lower than both options above because you don’t have to pay mortgage insurance every month with your payment.
There is a small downside though.
The VA guidelines are a little more tight than most loans so you might qualify for a little bit less than you would with another loan. They’re also a little more strict on property condition.
No buying fixer uppers with this loan.
If those two things don’t bother you then it’s hard to go wrong with the VA home loan.
Loan Option #4: Cal-Vet Home Loan
The Cal-Vet home loan is also a zero down payment loan available only to veterans, but with a few differences from the VA loan.
Cal-Vet is exclusive to veterans in California, hence the “Cal” in Cal-Vet.
It is also a 40 year home loan, with the other options being 30 year loans.
The good thing about a 40 year home loan is that it lowers your payments for the same priced property.
When you pair that with the fact that this loan is zero down payment, it’s an excellent option for Veterans in California.
This loan is pretty strict though and is pretty hard to qualify for when compared to the other loans that we’ve gone over. They’re more strict on property condition, income qualifications, and even credit.
It is also less mainstream and less people know how to do it but if you fit in the box, it could be a sweet option.
Loan Option #5: USDA (United States Dept. Of Agriculture)
Doesn’t the USDA deal with food?
Yes… And home loans.
The USDA home loan is another zero down payment option.
It’s a 30 year, government backed, fixed interest rate home loan with one main qualification.
It has to be a rural home.
The USDA only gives out loans on homes outside of city limits, or inside the city limits on smaller communities.
The great part here is that the Modesto area is surrounded by communities that qualify for this loan.
The USDA home loan does run out of money quickly though.
They seem to get funds several times throughout the year and quickly use it up giving out loans. If you don’t make it in time, they will put you on a waiting list until they receive funds again.
If you’re looking for a home outside of Modesto or in one of the smaller surrounding communities, this is a great option for getting in a lovely home with zero down.
Loan Option #6: Local DPA’s (Down Payment Assistance) Programs
DPA programs are not really home loans themselves.
They simply help you get a home loan.
Down payment assistance programs work by loaning you the money for a down payment, and requiring you to pay it back only after you have paid off your home, or when you sell it.
The great part is that these loans are usually given at extremely low or even zero percent interest rates.
Down payment assistance programs are usually given by local cities or counties to encourage buying of homes in certain areas.
While it’s not always the case, it seems like the majority of these loans are for lower income families or for less desirable neighborhoods.
They are also difficult to process and are probably one of the hardest ways to get into a home with no down payment.
Unconventional Options For Zero Down
There are also more unconventional, and as such less likely, options that you could get zero down payment which I’ll go over quickly.[password-protect]
One is to get owner financing. If the owner of a home you want to buy is willing to give you a loan for zero down payment the boom… You’re in.
There are also ways that you can have the down payment loaned to you.
Because of the crazy loans that were given from 2004 to 2007, this will most likely have to be a private loan at a high interest rate. There are banks that we work with who will still do this though.[/password-protect]
BONUS… How To Get Somebody Else To Pay Your Closing Costs!!!
When you get a loan, there are up front costs involved other than the down payment.
These costs are called closing costs.
Closing costs pay for the loan origination, loan points, escrow fees, lender fees, recording fees, and anything else having to do with the processing of your home and loans.
The cost of these can be anywhere from a few hundred dollars in rare cases to over ten thousand dollars for expensive homes.
As you can see, closing costs can become a heavy weight to lift, even if you’re getting a zero down payment loan.
But you don’t HAVE to pay them!!!
What you do is[password-protect] you ask for the the seller to pay for your closing costs when you write your offer. Many times the seller will take it without a fight but in some cases they won’t.
If they won’t, you can try raising your offer to reflect the cost to them. Then you’re essentially taking a cost that you would have to come up with in cash, right now, and you’re spreading it across the life of the loan.
Having the seller pay for closing costs[/password-protect] is a great way to save you thousands of dollars when buying your home.
Do You Qualify?
You may be wondering, “Do I even qualify for any of these home loans?”
I’m sure that you’ve noticed that getting into a home with little to no down payment may be a little more challenging than having a big wad of money laying around.
But, you don’t have to go talk to a bunch of loan officers to find out if you would qualify.
In fact, you don’t even need to leave your seat.
You just fill out a quick form, send it off, and we’ll let you know if you meet the guidelines.
We don’t even need any sensitive or personal information.
Did you know that one single person could cost you thousands of dollars when buying your home?
This person is your real estate agent so choose CAREFULLY.
I’ll show you how in Part 3.