Steps To Buying A House With Little Money And No Closing Costs

We will be covering the steps to buying a house with little money and no closing costs. Most Americans can easily afford a new mortgage payment on a home purchase. The difficult part is coming up with the down payment and closing costs for the home purchase. No matter how much you make, saving money is always a hurdle for most people. Most folks think you need a 20% down payment and a lot of money to buy a home. Potential homebuyers are under the assumption you need great credit and higher credit scores. Home prices are increasing at an alarming rate due to the strong economy, record-low mortgage rates, and more companies expanding remote job positions. Millennials, renters, and future home buyers are looking in buying a home sooner than later. in this blog, we will cover the step-by-step guide to your path of homeownership with little to no money down with no closing costs out of your pocket.

What Are The Benefits Of Owning A Home?

Buying a home is one’s biggest investment for most folks. Homeownership has many benefits. There are many benefits to buying versus renting a home. Homeowners have tax benefits where renters do not. Mortgage interest is tax-deductible for homeowners. Homeowners can build equity in their homes when their homes appreciate as they pay down their mortgage loan balance. A home is one of the few investments one can enjoy and use. You do not have a landlord to report to. You can have a dog and other pets without asking for permission. You have the security of knowing you will have home many years to come and not worry about the landlord not renewing your lease. 

What Added Responsibilities Do I Have As A New Homeowner Versus A Renter?

However, there are negatives to owning a home. Renters do not have to worry about maintenance. All they need to do is contact their landlords if anything breaks. All maintenance is covered with the rent paid. Homeowners have responsibilities with taking care of the property. Homeowners are responsible for their own maintenance. Anything in the house breaks, the homeowner needs to fix it. Some repairs are very costly. For example, replacing a roof or replacing the HVAC unit may cost up to $10,000 or more dollars.

Can I Get A Mortgage With Bad Credit?

Gustan Cho Associates are experts in helping homebuyers with little to no credit and bad credit qualify and get approved for a mortgage. You do not need a 20% down payment to qualify for a mortgage. FHA loans are the most popular loan program for first-time homebuyers with little or no credit and borrowers with prior bad credit. You can qualify for an FHA loan with credit scores down to 500 FICO. First-time homebuyers with at least a 620 credit score can qualify for a conventional loan with a 3% down payment. VA and USDA loans do not require any down payment on a home purchase.

Does The Seller Assist With The Closing Costs on a Home Purchase?

Most people do not have to worry about coming up with closing costs. Closing costs are normally covered with a seller concession by the home seller. If the buyer is short of closing costs, the lender can give a lender credit in lieu of a higher mortgage rate. Non-QM mortgages and bank statement loans for self-employed borrowers offer alternative mortgage loan programs with a 20% to 30% down payment. Having prior bad credit, outstanding collections, charged-off accounts, and late payments are fine. However, lenders want to see timely payments in the past 12 months. The first step in buying a house is to get qualified and pre-approved for a home mortgage by a loan officer.

How Long Does It Take To Get Pre-Approved For A Mortgage?

Once you can go shop for a home, you need to get qualified and pre-approved by a lender. Make sure to interview several loan officers and check their credentials and reviews. Find out what type of mortgage loans they are experts in and see if they can deal with your type of income/credit profile borrowers. Find out what type of lender overlays they have and what their turnaround time is once you got an executed real estate purchase contract. Most lenders take no more than 30 days from the start of the mortgage loan application being submitted until closing. It should not take more than a few days for a new client to get qualified and pre-approved. 

Evaluate Your Personal Finances and Compare the numbers on How Much You Can Afford versus How Much House You Qualify

Once you have decided you are going to buy a home, the first Steps To Buying A House is qualifying for a mortgage. Remember one thing. The most important thing to consider is not how much you qualify for but how much house can I afford. Lenders do not take account of your personal expenses such as debts that do not report on the credit bureaus. Everyone has a different lifestyle. Mortgage underwriters only use debts that report on credit bureaus when calculating the borrower’s debt to income ratios. Remember to consider how much house can I afford versus how much of a house can I qualify for. 

How Much House Can You Afford Versus Qualify

The following debts are not taken into consideration by underwriters:

• Utilities such as electric, gas, water, cable, internet, phone, other monthly household bills
• Childcare and/or elderly care expenses
• Auto, medical, other insurance
• Education
• Daycare
• Vacation
• Repair reserves
• Maintenance costs
• Other personal expenses
• Gas and travel expenses (tolls)

Review your personal finances. You do not want to spend most of your household income in paying for your mortgage and not have much left over for your personal expenses.

How Long Do You Plan On Living In Your Home?

Renters have the luxury of moving often versus homeowners. Buying a home requires a homeowner to live in the home for at least a few years. It takes time and planning in selling a home. Also, if you buy a house and plan on selling it in six months to a year, you will most likely lose money. Homes do appreciate but not that quickly. Also, home sellers need to pay a 6% realtor commission. However, when the home appreciates in three to five years, homes do appreciate and homeowners will most likely make a profit from the equity they have built. Those who do not plan on staying in the home for at least three or more years should not purchase and rather rent.

Steps To Buying A House And Qualifying For A Mortgage

One of the most important Steps To Buying A House is qualifying and getting pre-approved for a mortgage. Make sure that you are fully pre-approved by a loan officer prior to entering into a home purchase contract. Everyone has different credit and income. Some borrowers have perfect credit while others may have low credit scores and bad credit. Prior bad credit such as bankruptcy, foreclosure, late payments, collections, charged-off accounts does not disqualify borrowers. Lenders are looking for borrowers who have re-established their credit and have paid their bills timely in the past 12 months. Not all lenders have the same mortgage lending requirements. Many lenders have lender overlays. Overlays are additional mortgage guidelines set by individual lenders besides the minimum agency guidelines. For example, HUD requires a 580 credit score to qualify for a 3.5% down payment home purchase FHA Loan. However, most lenders will require a 620 FICO. The higher credit score requirement is called a lender overlay. For homebuyers with bad credit, shop for a direct lender with no overlays such as Gustan Cho Associates.

Shopping For A Home

After getting pre-approved and armed with a pre-approval letter, homebuyers can start shopping for a home. Interview realtors and choose a real estate agent who knows the area. Make sure you get along with the realtor. Check out their online reviews. What type of property is best for you and your family?  A condo, townhome, or single-family home. Location is key. Make sure you research the school systems, commute to work, traffic conditions during rush hour traffic. Amenities in the area. Questions asked should be how far is it to the expressway?  Where are the nearest shopping centers?  How far is the fire department in case of an emergency?  How far is the nearest hospital?  What are the property taxes compared to neighboring areas?  What are the crime statistics in the area?  How are the neighbors?  Nearest restaurants and stores.

What Experts Say About Owning Versus Renting

Owning a home has many benefits versus renting. There are many cases where owning a house is less expensive than renting. However, with the pros, there are always cons. Renters have the luxury of contacting their landlords if maintenance is required or something breaks down. However, in lieu of landlords fixing broken items and/or doing maintenance, renters are paying the landlord’s mortgage, helping the landlord build equity, and giving the landlord monthly cash flow. Homeowners are responsible for maintenance and repairs. Property taxes and insurance are the responsibilities of the homeowner. However, the homeowners are building equity and after the mortgage term is up, the home is theirs.

Main Benefits In Becoming A Homeowners Versus Being A Renter

There are countless benefits of being a homeowner versus being a renter. Pet lovers can own a dog and/or cat without asking the landlord or putting an additional deposit. A landlord cannot ask you to leave and not renew your lease. You can decorate your home any way you want without permission. Homeowners get to deduct mortgage interest on their income tax returns. After the mortgage term is up, homeowners own their homes. The only payments they need to make are property taxes and homeowners’ insurance. A home is most people’s biggest investment in their life.