How To Buy A Home With A Partial Down Payment Business


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How to buy a house with not enough money? Contrary to popular belief, you can buy a house even if you don’t have enough money to do so. It’s a bit technical, but it will force you, your real estate agent, and your lender to think things through together. Here is how it can be done.

Let’s say you have a good credit score, have good income, and have manageable expenses against a proposed mortgage payment. Say you are trying to buy a house for $ 500,000. Let’s say the total amount of money you have is $ 15,000. Well when you buy a house you have to have a down payment plus closing costs. What if your income is otherwise very strong compared to the proposed house payment along with other monthly expenses you have in your life? Well, if your down payment is $ 15,000 and you buy a home for $ 500,000, you are probably going to need at least $ 27,000. You need 3.5% on $ 500,000, or $ 17,500.

So the good news is, you have the down payment. You can apply for seller credit for the difference of $ 10,000, which could make your negotiation to purchase more difficult, especially if there are other offers for the same home. Or you can split the credit you need and get seller credit for $ 5,000 secure and lender credit for an additional $ 5,000, then you only bring in $ 17,500. Another alternative would be to take a much higher interest rate. For example, let’s say the interest rate you get is 2.875% on a 30-year fixed FHA and you have the income to support it. You could effectively consider taking a rate 1% higher than the market rate, say 3.875% in this illustration, and getting the $ 10,000 loan from the bank instead of paying it. This gives you and your real estate agent a better negotiating position, and it allows you to walk into the house with the cash you have available while still charging you an amount you can afford. This is a solution to get you into the house with the money you have. Remember, you can always refinance the house later. VA and FHA streamline refinancing or switch to conventional loan and ditch monthly private mortgage insurance. A good, creative lender who understands mortgages and has specific experience dealing with specific borrowers in situations like this is a great place to start.

Scott Sheldon is a local mortgage lender, with a decade of experience assisting consumers with the purchase and refinancing of primary residences, second homes and investment property. Learn more at www.sonomacountymortgages.com.

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About Matthew R. Dailey

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