There are many ways to buy a home, even if you have bad credit and little or no money to put down. A few of the basics are sweat equity, seller carry-back, rent-to-own, and community programs.
Purchasing a home can quickly feel overwhelming, so they’re a few tips to keep in mind to maintain the excitement and help make home hunting simpler. No matter if you have little or no money to put down, you are capable of making your dream home a reality. Here are a few options to consider:
1) Sweat Equity
Are you handy with tools? Have a knack for yard-work? A passion to paint? Sweat Equity is a way to get a home by trading work for equity in the house. It’s an excellent way to monopolize on skills you have to put towards a down payment or for a later purchase.
If you think you can use your trade talents try looking at fixer-uppers. Check out the neighborhoods you’re interested in and see what options you have. You may be surprised by all the choices you have- often the homes that need a bit more attention and fixing have a hard time selling. The owners are likely eager for an offer and easy to work with as well. Houses that fall into this category will range from needing a little cosmetic work to being completely falling apart. Be mindful of the project you are taking on, and gauge the effort to the outcome. Sweat Equity endeavors can be gold mines or endless stress. Choose wisely.
Before making your decision, get a home inspection. By doing this you will be aware of exactly what you’re taking on before you begin.
2) Seller Carry-Back
Another choice when looking at a new home is finding one with an assumable loan. Rather than buying out the owner’s remaining equity, try asking the seller to carry a second mortgage for the remaining money owed. If you’re able to get the seller to carry the rest, you will be able to get the home for no money down. This will allow you to put your saved money towards other needs for your new home!
3) Offer an Object for the Down Payment
When purchasing a house try thinking beyond finances. Offer something other than cash to the seller. Do you have land, a boat, or other property of value to exchange? It’s helpful to listen to the seller when thinking outside the typical cash down payment.
Listen and learn — find out what they want and need. Maybe you have (or can easily get) just what they need. For instance, maybe they are looking for an RV and you have one you want to get rid of or no longer need. Offer that vehicle as a down payment, to save you some money and help the seller out as well. It’s a win-win all around.
4) Offer Services for the Down Payment
Continue thinking outside the standard money exchange. While trading values is a great approach, you also have intangibles at your fingertips. Think about services you can offer the seller. What services or expertise do you have to provide the seller with in lieu of a down payment?
A couple of examples would be: if you’re a mechanic you could offer $10,000 worth of auto services, as a dentist you could provide dental work, or as a designer your desktop publishing services. The options or endless and sometimes just require some unconventional thought.
Looking for foreclosure properties that require little or no down payment is also a great tactic. Some lenders and government agencies will let you buy a foreclosure with no down payment if you have a good credit score, or if they’re anxious to have the home occupied. It’s can also benefit you to share your skills (carpentry, landscaping or even painting) so that you can use to increase the home’s value.
It’s important to not that distressed properties can be assumed with little or no down to save them from foreclosure.
6) VA or Other No Money Down Loans
Try looking in conventional loan programs, like VA or FHA that require little or nothing down. VA loans help veterans get into their homes. There are often programs available to first time buyers or people who are distressed (such as after national disasters like Hurricane Katrina) that will help people get into a home with little money down. As you look at these various loans keep in mind that you will need to qualify for the loan with the bank first. Be sure to have this critical conversation with your banker before assuming.
7) Find an Investment Partner for Equity Sharing
Look for an investment partner who’ll put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits. Teamwork really can make the dream work! Ask around and find a partner you trust and feel comfortable working with.
8) Wrap-Around Financing
Wrap-around financing is where you assume a seller’s VA Loan by doing a new Contract for Deed. Since this contract is flexible and does not have to follow the old loan, you can ask the seller to carry not only the loan amount but the rest of the purchase price of the house, letting you get in with little or no money down.
Always ask, you never know what options may exist.
9) Rent-to-Own or Lease-Option
One of the best ways to get into a home when you can’t get a bank loan is by renting to own. Remember that you may still have to get a loan later on down the line, but this is a great alternative to financially at first.
With a lease-option for 5 years, you can use that time to fix your credit in time to purchase the home when the time is up. You can always try to negotiate another 5-year lease-option if you need more time.
(For more detailed information on lease-options, check out our free eBook, “Buying a Home When You Have Bad Credit” at http://I-can-buy.com.)
10) Government and Community Down-payment Programs
There are many community and non-profit organization programs out there to help people get into homes of their own. Many of these do no require any money down.
There are some organizations and programs that will pay for some or all of the down payment for you. Generally, these are for lower to moderate-income individuals, but these days that includes a lot of people. You also usually have to be able to qualify for an FHA loan (which is somewhat easier than a conventional bank loan.)
Below is a list of organizations that have down payment assistant programs:
National Home Foundation
GiftAmerica Program (GAP)
The Nehemiah Program
New Song Down Payment Assistant Program
Homes For All Program
Also, be sure to check in your local area, many communities have similar programs set up. Investigate your community and see!
Remember- money or not, house hunting here you come! This is more than an investment; it’s your future, and your home.