These days, it’s not unusual for people to purchase their dream home without money. Although it may seem daunting at first, it’s definitely possible with a little bit of planning and preparation. This article will explain how to buy a house with no money in these times.
The best way to go about purchasing a home without money is to take out a mortgage. A mortgage is a loan that you take out from a bank or other lending institution in order to purchase a house.
The amount of the mortgage will be based on the sale price of the house, and you will be responsible for making monthly payments until the loan is repaid in full.
If you’re thinking about purchasing a home without money, it’s important to start planning now. Begin by researching different mortgages and finding one that fits your budget. Next, make sure you’re prepared for the financial commitment that comes with owning a home.
Step 1: Create A Budget
How to get ready to buy your first house on zero income may seem impossible, but it’s not. You can buy a house without money in two ways: having someone else buy it for you or purchasing one that doesn’t require any cash up front.
The key is creating a budget and sticking to it—and that means knowing how much money you have at your disposal before committing to anything.
Step 2: Know Where You Can Get Help
If you want to buy a house with no money, you must know where you can get help. Please do some research on programs in your area designed for first-time homebuyers and those looking to purchase their first home.
You might qualify for a government program, or several different organizations in your area may assist those who need it. The best way to find out is by calling and asking around.
Step 3: Understand Down Payment Requirements
The requirements for down payments differ depending on whether you’re purchasing your first home or refinancing an existing mortgage.
As of 2016, homebuyers putting less than 20 percent down when purchasing a house must buy private mortgage insurance (PMI), although FHA loans have different PMI requirements. For buyers putting 20 percent or more down, PMI is typically not required.
When buying a house, it’s smart to speak with your loan officer about any additional costs associated with PMI before offering a property.
Step 4: Determine the Monthly Income Needed
The monthly mortgage payment can be one-third of your gross income, but that’s only if you put 20% down on your home. You may need less than one-third as you pay off more of your principal balance or make extra payments.
A rule of thumb is that your monthly payment shouldn’t exceed 32% of gross monthly income (before taxes) once all other debt has been paid off and savings goals have been met.
Step 5: Compare the Amount Financed vs. Total Price
One first-time homebuyers’ biggest mistake is not understanding how closing costs and other factors affect what they can afford. Your monthly mortgage payment might be $1,500 per month, but that does not mean you have $1,500 in your checking account for a down payment.
Step 6: The Process of Buying a Home Without Cash
How to go about purchasing your first home is an exciting experience. But, of course, buying a house—particularly if you’re new to it—can also be overwhelming.
Here’s an overview of what you can expect when purchasing a home without cash. This process will vary depending on where you live and who you work with; however, in general, here are some steps that typically occur:
- You begin searching for homes and narrow down your choices.
- You contact a real estate agent to help find homes that meet your criteria.
- The agent presents those options and negotiates on your behalf (usually in exchange for commission).
- You review documents like loan applications and legal contracts.
- After finalizing these details, you move into your new home!
Step 7: Establish Your Credit Score
Even if you have zero money, you can still purchase your first home. In fact, according to HGTV’s real estate expert Toni Howard, many buyers get their first home using only other people’s money. There are multiple sources of non-need-based funding available to help establish credit scores in exchange for financial assets like your car or even your engagement ring.
Step 8: Take Advantage of Down Payment Assistance Programs
If you don’t have much money saved up for your down payment, you may be able to take advantage of a down payment assistance program. Many organizations or local governments will help you out, including small grants, loans, and loan guarantees. Programs can vary widely, so you must research each one before applying.
Step 9: Get Pre-Approved for a Mortgage Loan
Getting pre-approved for a mortgage loan will help you buy your first house, and it also enables you to avoid losing out on your dream home because you can’t come up with all of the money at once.
You’ll need to submit pay stubs, bank statements, and W-2 forms to get pre-approved for a mortgage loan. Be sure that all of these documents are as recent as possible before turning them to your lender.
Step 10: Keep Track of All Documents Related to Buying a Home
It’s important to keep all of your financial documents in one place to keep track of what you have and don’t have. Having all of your financial records in one folder will help you buy a home if you need to apply for a loan at any point in time. Before applying for any loan, you must compile all of your financial statements from previous years.