Starter home buyers are often so freaked out by what they believe is the insurmountable down-payment requirement that they give up on the entire project and wonder if they will ever be homeowners.
Others manage to raise funds for the down payment but hit a wall when they find out about closing costs (yikes) in the five-figure range!
Let’s start this way:
Yes, you can buy a home without raising cash for either a down payment OR closing costs.
And no, you don’t have to be independently wealthy to do it.
Just takes some knowledge and willingness to be flexible on a few items.
US Department of Agriculture (USDA) Rural development loans. If you are willing to live in a rural area and make $86,000 or less (for a family of 1-4 members) or $114,000 or less for a family of 5-8 members, you may be eligible for this zero down-payment loan. You must be willing to live in a town that qualifies! In Yamhill County, EVERY town qualifies. In Washington County, it’s far more restrictive, so you must be flexible as to locale. Your best bet is to begin with a LOCAL mortgage guru who will give you the areas you can consider. If you would like a mortgage professional to give you info without obligation, email me for a couple of trustworthy names.
Chenoa Fund. Down-payment assistance for those with slightly higher income than USDA loan. Pairs with FHA loans or conventional loan products. For borrowers with challenged credit. Will pay entire down payment for an FHA loan.
Oregon Bond/Cash Advantage/Rate Advantage: First-time home buyers can get up to $15,000 in cash down-payment assistance or a discount interest rate on a mortgage loan. Will pay the full amount of the down payment. In some areas of the state, assistance is available without having to be a first-timers. Closing cost assistance is also available. Income eligibility depends on area, so you will need to contact a mortgage broker to see whether you qualify and what programs you qualify for.
VA Loan. For those who are veterans, zero down payment programs are available and can be used more than once. Borrower does not need to be a first-time home buyer.
Closing costs strategy
Closing costs are separate from the down payment, comprised of lender fees and a reserve fund made up of cash to cover your property taxes and homeowner’s insurance. They generally add up to 2-4 percent of the loan amount.
Hence, they can be as much or significantly more than the down payment.
Closing cost assistance programs are available here (Oregon Bond is one) and lenders often provide help for these costs. It is also possible to get seller assistance in paying these costs – even in a seller’s market. You will need a Realtor’s help here in structuring your offer so you can prevail even in multiple offer situations while needing closing cost help. Your flexibility in this case will be in how much house you buy.
Can I help you? Buyer’s agent services are always free, so feel free to call and get the help you need!