In order to be successful in real estate, you need to take the advice of a good quality lender experienced in the local area in which looking to purchase. While it is possible to secure a no down payment program, closing on a home in this unique real estate market is another matter. Following is what to be aware of…
In most markets throughout the country housing prices are rising. The pandemic has catapulted real estate prices in most areas in nearly every county across the country. So what we have is a situation where a house is listed low and then multiple offers come in and the house price is bid up. Competition is fierce and it takes creativity, a nose to the grindstone approach, and a proactive lender and real estate agent working on your behalf to get into contract.
If you are looking to buy a house now don’t have any money for a down payment. Here could have some challenges you need to know. The first is to get pre-approved for a down payment assistance program or Grant program funded through the state in which looking to purchase. On top of that, you’re going to need seller credit for closing costs which can be anywhere from 1 to 3% of the purchase price of the property. Most of these programs have income limitations so as a result, your borrowing power diminishes right out of the gate. The next challenge is getting an accepted offer on the property amidst fierce competition along with seller credit add-in for closing costs.
Adding in the no money for a down payment and you’re talking about a really difficult uphill battle in most markets to get into contract on the house. The bigger picture at the end of the day is should you really shouldn’t buying a house without having a down payment and/or without having the safety net. Justify your way around not using the money for a down payment generally isn’t a good idea as a result of the fact that these programs typically have higher interest rates and higher monthly payments as a result, so it just makes the situation far more difficult and your real estate agent.
This of course is if you are using down payment assistance. The other program out there that will allow you to buy with no money down is USDA financing, but that is only specifically geared towards an area in which the US Department of Agriculture designates as more rural less population. As a result, there are income limitations on that program as well and the debt-to-income ratio requirement on that program is particularly stringent.
The only other program that is eligible with no money down is VA. This program is particularly valuable because generally considered a widely available program and qualified veterans can have a solid chance of attaining an accepted offer. Generally speaking at the end of the day unless it’s VA financing a no-money-down program in this particular real estate environment in which we are present is probably not going to be in the cards. Going in with a 3.5% down FHA loan and/or getting a gift from family, or even your employer or even borrowing money from your 41K is a far better, more cost advantage approach than trying to get your foot in on a program that is working against you from the start. Don’t be fooled by the offers for no down payment. Suck it up, ask mom or dad for gift, find a way to come up with the down payment. You will be glad you did, and more importantly, your household family budget will thank you for it.
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