How to buy a home with no money?

For many renters, buying a home can seem like only a dream and never a reality. If only they had enough money for a down payment, then they could apply what they spend on rent to purchase a home. What if there was a way to purchase a home with a small one percent out of pocket cost, a credit score over 650, and an expert realtor and lender team? It really can be that simple!

With the help of two government-sponsored lending institutions, Fannie Mae and Freddie Mac, offer affordable options for the buyer with little or no down payment. Lenders can now offer several down payment assistance programs that have only a few basic guidelines. Most common is the debt-to-income ratio. When a buyer can reserve 50% or more of their monthly income for housing and incurred debt, they will qualify for the special down payment assistance programs. 

Debt-to-income ratio, or DTI, represents the percentage of monthly income that a borrower uses to pay his/her debts, including your future mortgage. When you have too much debt, that often leads to a loan denial. In 2017, Fannie Mae and Freddie Mac raised that Debt to Income ratio to 50 percent. Now, borrowers that use 50 percent of their monthly income for mortgage and debts can buy a home. 

But, how does this help your purchase if you have no money?

There are several new lending programs, including CalHAFA and OPEN Doors Down Payment Assistance Program. With these innovative lending programs, a borrower can use gifted money from a family member or qualify to borrow the entire downpayment. The OPEN Doors program has no income or location restrictions. The borrower must pay for typical mortgage insurance. This program often carries a two percent fee for processing that is factored into your loan.

When a borrower is interested in finding out about one of these lending programs, several things must be considered. 

FIND A GOOD LENDER

• All lenders are not created equal. Choose wisely. Be sure to consult with several before selecting a lending partner. Also, shop rates, programs, and fees before making your final decision. There are many types of lenders to choose from, including Mortgage Brokers or Mortgage Bankers, Direct Lenders (Banks or Credit Unions), and Secondary Lenders (Fannie Mae and Freddie Mac).

• GATHER YOUR FINANCIALS

• • • Two years of filed tax returns
• • • Recent bank statements with all pages included (even the blank ones)
• • • Several Weeks of Pay stubs
• • • A copy of the driver’s license for all applying parties
• • • Completed lending application
• • • A credit check by Lender

CONTACT A GOOD REALTOR

Knowledge is power to the borrower. Choose an experienced, full-time professional. Think of a Realtor as your financial advisor. Although traditionally they help you find a home, today, a borrower often will find their own property. Your Realtor will research schools, tax records, lending timelines, repairs and vendors, insurance, moving resources, and so much more.  

Communication is critical. The biggest complaint from home shoppers is the lack of communication they receive from a Realtor. A good professional will update you with timelines, process changes, escrow details at least once a week.

Finding an area expert. In 2018, the National Association of Realtors reported there are 1.3 million Realtors in the United States. With so many choices, it can be difficult to find an area expert. Zillow, Google, and Yelp can are helpful resources for agent reviews. 

An Effective Negotiator. Finally, it’s important to work with a Realtor who has tough negotiation skills.  When you buy a home, there are several times your agent will need to negotiate on your behalf. These times include at purchase, after inspections, the push for a closing date, move in, and with your lender. Seek someone who is focused on your interests,  not just their own. Negotiation is a skill that is learned and practiced. Be sure your resource has a track record to prove they have what it takes.

Now’s the time to make home ownership a reality.

If this is the year you want to stop throwing your hard-earned money away and purchase a home, then this is the ideal time to make that dream a reality. As housing prices drop and become more affordable, interest rates decrease, and lending restrictions loosen up, home ownership becomes easier than ever. . 

For more information about the Open Doors Down Payment Assistance Program or to find a resource near you, CLICK HERE.

Written by Liz Jones, Jones Realty Group at Keller Williams Realty