How To Buy A House With Zero To Little Money Out Of Pocket

November 7, 2015

Cash on hand

USDA Rural (small town) and VA Military home loans offer 100% financing and the seller can pay for most or all of the closing costs. Also, there are some programs which require little money down such as FHA and Fannie Mae Conventional loans such as the HomeReady Program. Furthermore, if you have excellent credit and you intend to purchase a higher priced home and want to reduce your monthly payment then you may want to consider the NO PMI or NO Mortgage insurance program.

One of the biggest obstacles to homeownership is funds for down payment and closing costs. Here are ten ways on how to buy a house with funds other than savings:

  1. Gift from relative which must be documented with a gift letter provided by the mortgage lender and you must source the funds with a copy of a cashier’s or certified check from the donor. You can’t just get cash from your parents or relative and deposit the funds into your bank account.

  2. 401k or retirement loan/distribution-There are many employers which allow you to take out a loan or distribution to purchase your first home.

  3. Income Tax Refund

  4. Sale of personal assets such as car, motorcycle, boat, memorabilia, coin collection, etc. but you must show bill of sale and proof of receipt and deposit of these funds.

  5. Cash on hand-You may have cash in a wall safe, under your mattress, or friends owe you money but banks will not use these funds unless it has been sitting in bank for at least 60 days.

  6. Stocks/Bonds-You need to consult tax advisor for tax consequences from liquidating these assets.

  7. USDA Home Loans-You can obtain funds from an unsecured loan or credit card advance. Also, if home appraises for more than the purchase price you can roll in additional closing costs into the loan which are not paid by the seller.

  8. FHA Home Loans-You can get Employer assistance as long as it is not an advance on your salary. Also, if you intend to purchase a home from your parents or relative then you may use equity in the home for down payment and closing costs if they intend to sell you the home at a discount which is below the market value.

  9. VA Loans-You can apply for Dream Makers Grant up to $5,000 to be used toward down payment and closing costs if you are on Active Duty, National Guard, or Reserve in Military.

  10. Security Deposit from rent-Make sure you can get these funds prior to closing on your new home.

FirstHomeBuyers should contact a lender 6 to 12 months prior to buying a home to get a detailed loan estimate of ALL the costs associated with their loan. Next, you need to sit down and make a list of all of your current and potential assets you can use for the down payment and closing costs as well as moving expenses. Once you have made this list you need to contact your lender to discuss what types of documentation are required for the assets you want to use for the loan. Don’t miss this step because I have seen too many situations where first time buyers deposited “cash” from parents or sale of car with no proof of the sources of these funds and the lender can’t use funds which have not been verified.

You can contact FirstHomeBuyers at 847-516-5743 or fill out the short pre-approval application and one of our representatives will get back to you to discuss which programs you may qualify for and what documents you will need for assets and other items associated with your loan.