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Can you purchase a home with no money down?

Posted on May 27, 2015 by Ray Williams (NMLS #216267).

Can you realistically purchase with no money down? There are definitely multiple choices for loan programs that will allow for lower down payment options and even some that offer down payment assistance grants.  The era of only being able to purchase a home with 20% to put down is gone.  Yes, 20% down is great and can sometimes be ideal but not necessarily realistic for all of us, many are unable to come up with 20% down, and that is ok. Many times hanging on to the money you saved may be more important than putting ALL of it into the down payment.

The problem I am consistently coming across is that just because there are down payment assistance grants available it doesn’t mean that you don’t need ANY funds for purchasing a home.  It does not mean that you can purchase a home with zero down.  Unless you are a veteran, this is HIGHLY unlikely! You should not expect or assume that you can purchase a home with no money in the transaction. You need to have money in the bank. Trust me, even if you are lucky enough to have close to zero down, the money you did save and ended up not using you will need it later for the home!

Most of these assistance programs require that you will need to have a minimum of $1000 of your own funds into the transaction.  Now, there are ways of bringing less money to the table, such as getting gift funds, lender credits, seller concessions, etc., but if you don’t have these available to you then the answer is NO.  You can’t purchase a home with no money in the bank (again, whatever you did save and didn’t use, you will use later) and no money at the closing table. Remember you will need to have funds for earnest money.  These funds need to be readily available and verified, which will be applied to your closing costs.

The truth is that even though there is down payment assistance grants, there is still a cost in getting a home mortgage.  To understand and get a better idea of what it would look like and what would be expected in purchasing a home you need to talk with a lender.  You need to see what options may be available to you.  If you need or are interested in the possibility of down payment assistance, you need to find a lender that can offer these programs.

What is the ideal amount you should save when looking to purchase a home? You should expect that closing costs are around 2-3% of the purchase price (on average $3000-5000).  You honestly should not be buying a home if you have no money in the bank.  Make sure you get pre-approved before looking at any properties!  This means at minimum completing a loan application, running your credit, sending paystubs (one month’s most recent earnings), two years tax returns & W2’s and two months most recent bank statements.

If you would like to discuss further, please reach out to us, we are always happy to educate and assist.

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