If you’re looking to buy a house with little or no cash your options may be limited. Here is what you need to know to get your foot in the door, successfully…

Down payment assistance programs

Down payment assistance can be sponsored by a local state or government entity or entity grant. Essentially, down payment assistance programs allow for you to obtain the funds that you otherwise would be coming in with as the down payment between your loan amount and your purchase price. Through a separate resource such a state program for you would close escrow on a home perhaps only paying closing costs. Down payment assistance programs once a popular option for home buyers, now is a scarce resource for people looking to buy a home. Some of these programs still exist if you can find them and many have specific location and income requirements as these programs are designed for lower income families.

How it fairs in the marketplace

The down payment comes in the form of a gift or a loan through the entity which is providing the funds. If you are trying to buy a home using down payment assistance it is going to be challenge. Here’s why:

• low unemployment + beefy job growth = rising home prices because more people working
• people buy homes when they feel secure in their financial situation

As long as these factors remain, competition will be strong. In Sonoma County, California there is little inventory with big housing demand driving housing prices up. Other buyers in the marketplace are working with 5% down or 3.5% down, or more, in some cases-all cash. Every agent has a goal of serving their client which means advising them on which offers are the strongest. Offers with a down payment are stronger on paper and are attractive to a seller who has financial goals of their own.

Best practice

To maximize your buying potential with the most opportunity, work with a down payment. Both Conventional and FHA Loans allow for the use of gift funds. While you may not have access to gift funds, other options include the following sources for a down payment:

• checking
• savings
• cd’s
• money market
• 401k
• IRA
• Stocks,
• Bonds
• Cash value life insurance
• selling of personal property
• security deposit refund
• tax refund

If you have exhausted all other efforts to buy a home and just simply do not have the cash, that is ok. It may that buying a home right now is just not the financial move. It is far better to be position to buy a home through personal budgeting and planning than to buy a home with down payment assistance and not have the cash to fix something on your home down the line. Home repairs can add up and last you want is to over spend living beyond your means. Talk to a lender and realtor who can help you buy a home when the timing is right for you. It may mean buying a home down the line when your financial situation improves. A good real estate professional knows that buy a home is a huge decision which also may mean providing more guidance to those who need it.

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