October 26th, 2018 3:00 PM by Jackie A. Graves, President
... wanna know how to buy a house for just $10,000 upfront, max? No, this isn't
a scam, or a ploy to lure you into purchasing some rickety shack in the middle
of nowhere. We're talking about a nice house in a nice
neighborhood—for no more than a hundred Benjamins.
We get why
you're skeptical, given the high price of homes today. According to realtor.com data, America's median home
price rose 7% last year to $295,000. And since many assume
a 20% down payment is required to buy a home, that would amount to you coughing
up $59,000 before you ever move in! No wonder many of us expect to
spend years scrimping and saving to be able to make our home-buying dreams
But here's a
reality check: The upfront costs of buying a home have a lot more wiggle room
than you might think.
largely comes down to trimming two variables: your down payment and closing costs.
Here's the scoop on how to whittle these down to size so all you need is
$10,000—or even less—to buy a home of your own.
secret, in a nutshell: Yes, a 20% down payment is traditionally recommended for
conventional loans since it allows you to avoid paying an extra monthly fee
called private mortgage insurance
(PMI). But that doesn't mean 20% is necessary.
such, the first key to buying a home for $10,000 or less is to take out a
mortgage that requires little money down, or no down payment at all. There are
four options available.
If you or
your spouse serve or served in the military, you may qualify for a Veterans Affairs
(VA) loan. Under this program, the VA guarantees the loan, reducing
the risk to the lender. You can finance up to 100% of the house's cost, so you
won't have to come up with any money for a down
payment. Just keep in mind that there are minimum requirements for your income
and credit score that vary by lender, so it's a good idea to
shop around for a VA loan to ensure you get the best deal.
some fees associated with VA loans, but they can be rolled into the total loan
amount that you make payments toward monthly.
According to Jennifer
Beeston, vice president of mortgage lending with Rate.com, there are many
myths about VA loans that cause people to avoid them.
veterans do not use their VA loans because they hear they are too
difficult," she said. "But honestly, VA loans are very easy and offer
a tremendous benefit to the borrower."
The U.S. Department
of Agriculture offers loans to Americans with low to moderate
incomes who want to buy a home in a rural area. Like with VA loans, you can
borrow up to 100% of the home's cost, eliminating the need for a down payment.
USDA loans do have some fees, but you can roll them into the mortgage.
loans are fantastic loans that many people do not know about, but should,"
to pay ongoing fees for mortgage insurance, he notes, but it's less than an FHA
or conventional mortgage.
If you don't
qualify for VA or USDA loans, another option to consider is a Federal Housing Administration (FHA) loan. With an FHA loan,
you still have to come up with a down payment, but it's only 3.5% of the home's
median $295,000 home, that would mean a down payment of $10,325. On a $150,000
home, you'd only have to put down $5,250. Depending on where you live, that
could be enough to buy an excellent house in a great area.
downside? Because you're making a small down payment, you will need to pay
mortgage insurance (PMI). But you can roll that cost into your total mortgage.
unions offer mortgages that require only a small down payment, or no payment at
all. It's wise to check out local credit unions in your area to see what kind
of home loans they can offer you.
Even if you
get a home loan that covers 100% of the home's cost, you typically need to come
up with thousands of dollars to cover closing costs. Those are the fees paid to third parties
who facilitate the sale of a home. They include the loan origination fee,
credit report fee, title search fee, and more.
costs vary widely, they typically total 2% to 7% of the home's
purchase price. So on a $295,000 home, your closing costs would amount
to about $5,900 to $20,650.
doesn't necessarily mean you have to raise that money yourself. There are two
other ways to cover closing costs.
One of the
best ways to pay for closing costs is to negotiate with the home's seller to
cover some or all of the costs. Depending on the housing market in your area,
sellers may be anxious to close a deal quickly and will be more motivated to
pay for your closing costs just to get the sale over with. If you show a
willingness to close quickly, you will have more bargaining power.
have zero money saved, I have seen Realtors ask the seller to cover 3% of
closing costs," said Beeston. "If the house is under $150,000, you
may need to ask for more than 3%, but that's something the Realtor can
A number of
states offer first-time home buyer programs and closing-cost assistance grants.
In return for a commitment of living in your new home for at least a few years,
you can get a grant to help with closing costs. To find programs near you,
check out your state housing
When it comes to buying a home, we typically expect to spend years scraping up
enough money to cover a down payment and closing costs—but that might not be
necessary. There are plenty of ways to downsize not only your down payment, but
those pesky closing costs to put homeownership within reach for as little as
$10,000, or even less.
advice on buying a home? Check out our first-time home buying guide for more, or talk to a
lender to learn how big a mortgage you can afford.
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