Tips on Buying Homes with No Money Down

The universally accepted fact known by every normal salary-earner like you and me is that rent is a sunk cost and a home builds equity. The mortgage payment on a home is worth the investment. There are many sources in the market which are ready to offer you home loans that include mortgage banking companies, commercial banks, community banks, credit unions, mortgage brokers, and other financial institutions. Other than this there are many Government programs for home loans like the federal programs, state programs, city and county programs, Freddie Mac and Fannie Mae and many more. But the big dive into home owning stays a dream for most of us because of the difficulty to afford a down payment of 5-20 percent of the cost of the house. We are all aware of how long it takes to save so much from our dream vacation trips and our wives' little shopping sprees.

Most of the potential real estate buyers never turn into real buyers due to this problem. But in reality there are many ways in which you can either minimize or even eliminate the down payment on a house. To name a few of them, VA loans, Owner financing, Lease or purchase, House trading, Job-related federal programs and State and Local government programs have been introduced to help you wade out of this situation.

VA loans, better known, as the Veterans Affairs loans are schemes established to provide home loans with no down money through the Department of Veterans Affairs. All the currently engaged as well as the retired members of the military service, veterans, POW's and MIA's, their unmarried widows can be benefited from this loan structure. Some others who fit in this category are members of Selected Reserves or National Guard with a standing job of six years, WW II service from the merchant marines, coast guards and the like. However this loan structure the precondition that the eligible person can use this loan to posses a single house, which should be the prime residence of the member himself. It cannot be used as a rented home or a vacation home.

Owner financing or Lease-Purchase is yet another option. We see that as there are quite a few unsold houses in the market, where the sellers get impatient to sell their houses at the earliest. Therefore, they are willing to assist the buyers. They ask for no money down. Moreover these petty sellers are over burdened with the exuberant competition with builders who fund down payments on their new homes. In such situations the panicked sellers get into agreements for lease-purchase or owner-financing plans. These also have the benefit of no down payments. Herein the buyer should be cautious in making some verification to find out if the program turns out to be good or bad.

Some of the points to be kept in mind before making any agreements are -

- All legal transactions should be prepared on a standard legal form.

- These legal forms can be obtained from any major office supply stores.

- An experienced Attorney should draft all owner-financing contracts.

- For purchase agreements the buyer gets into a monthly payment arrangement with the seller for an amount that is more than the monthly rent he would receive.

- For sale of the house a portion of the additional money can be returned to the buyer and used as a down payment.

- If the buyer is unwilling to buy the house, the additional money is forfeited.

- There would be no tax deductions for the interest of the house payments.

- If the seller goes bankrupt or loses the home in foreclosure, the buyer is entitled to a huge loss and many more things have to be kept in mind.

House trading and lines of credit is yet another option for avoiding money down on a house. The professional real estate investor gets into no money down investment by trading one property for another. Exchanging a large property for several small rental properties carries on trading.

One more arrangement called the HUD is a very feasible plan by The Office of Housing and Urban Development. It finances first time homeowners. This program is exclusively designed for all the low-income families who would like to invest in a house for the first time. This plan is provided with the benefits to be free from a significant down payment and closing fees.

Another program called the $10000 down payment gift program is an opportunity for all homebuyers. A gift down payment program allows up to $10,000 or 5% of the purchase price, whichever is lower. This amount is never repaid and these are treated as gifts. Any homebuyer is eligible for this plan with no income limits. The home purchasers can go into this scheme and they need not be first-time homebuyers too. The houses that come under this category need not be pre owned; even a newly constructed house is included in this program. These gift funds can be further used on any FHA or HUD loan for the down payment. The HUD loans are based on need but not the FHA loans.

The job related federal programs are a boon for all the local farmers and the police personnel. In this scheme those people with limited income and living in rural areas are eligible to posses their home for no down money. The Rural Economic and Community Development Administration offer farmers home loans with no down money. Moreover their monthly payments may be subsidized and the interest can be as low as one percent. Further the police could be attracted to stay in crime-affected areas by offering them federal programs to purchase houses in these areas for no down money.

If you are still dreaming of making money in real estate or trying to posses a new house, then it is worth considering the options discussed here. You could determine which suits your lifestyle best.