How to purchase a house with a partial down payment

How do you buy a house with not quite enough money? Contrary to popular belief you can buy a house even if you don’t have enough money to do it. It’s a little technical but it’s going to require you, your realtor, and your lender to put your heads together. Here’s how it can be done.

Let’s say you have a good credit score; you have a good income, and you have manageable expenses for a proposed house payment. Let’s say you’re trying to purchase a house for $500,000. Say the total amount of money that you have is $15,000. Well, when you purchase a house, you must have a down payment plus closing costs.  What if your income is otherwise very strong about the proposed house payment with other monthly expenses you have in your life? Well, if you’re down payment that you have as $15,000 and you’re buying a $500,000 house you’re probably going to need at least $27,000. You need 3.5% down on $500,000 which is $17,500.

So, the good news is you have the down payment you can ask for, a seller’s credit for the difference of $10,000 which could make your purchase negotiation more difficult especially if other offers are looking at the same house. Or you can split the credit that you’ll need and get a silver credit for a safe $5,000 and a lender credit for another $5,000 then you’re only bringing in your $17,500. Another alternative would be to take a much higher interest rate. For example, say that the interest rate you’re getting is 2.875% on an FHA 30-year fixed and you had the income to support it. You could effectively consider taking a rate 1% higher than the market saves 3.875% in this illustration and get the $10,000 credit from the bank instead of paying for it. This gives you a better negotiating position for you and your real estate agent, and it gets you into the house with the cash that you have while putting you on a payment that you can afford. This is a solution to get you into the home with the cash that you have. Remember you can always refinance the house later down the line. VA and FHA streamline refinance or going to a conventional loan altogether and drop the private monthly mortgage insurance. A good creative lender that understands mortgages and that has specific experience in dealing with situation-specific borrowers like this is a great place to start.

 

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