Looking for a way to buy a house without much money? Here's an idea from SourceOne Mortgage.
Consider an FHA mortgage for first-time buyers. These mortgages have liberal qualifying guidelines and require only a small down payment. And if you have no cash, you can use up to 100 percent gift money for the down payment.That leaves you with closing costs and prepaid and escrow expenses. With an FHA mortgage, you can fold the closing costs into the mortgage.
Whew! You've disposed of most of the expenses. All you have left to pay is:
- Money into an escrow account at closing, which will be used by the mortgage lender to pay your property taxes and home insurance.
- Prepaids, which are sundry expenses such as FHA insurance, a credit report and an appraisal.
Kathleen DeFrances of Source One suggests making a full price offer on a house and asking the seller to pay your escrow and prepaid costs. "With many offers made below list price, the seller receives the full asking price less the costs of the buyer's prepaids and escrows, resulting in a quick sale at a good price," she says.
If you find a seller willing to pay those costs and get through all the paperwork required with an FHA-backed mortgage, there's just one problem remaining - finding someone to make you a "gift" for the down payment.
Parents often help their grown children buy a first house, so that might be a good source for the down payment. Later, when you're more financially able, you could pay them back.
Alas, if you can't find someone to give you the down payment, you'll have to come up with the cash. But FHA-backed mortgages can be obtained with just a 3 percent down payment, about $3,300 on a $110,000 mortgage.
Before you buy a house, consider what the financial implications will be after you move in. Here are some thinking points from the nonprofit Debt Counselors of America, headquartered in Rockville, Md.:
- Make sure you have enough savings to cover first-year expenses of home ownership, such as new furniture, decorating and fix-up costs and unanticipated repairs. "If you're not careful, you can lose the home you worked so hard to buy," the Debt Counselors say.
- If you and your spouse are both working and plan to start a family in the near future, figure out if you will be able to pay the mortgage on one salary during the time mom or dad takes unpaid time off from work.
- Realize that the cost of home ownership goes well beyond the mortgage. You must also pay property taxes, home owners insurance and regular repairs.
- If you want to save for the future (you should), keep the cost of your mortgage to 24 percent or less of your monthly net income.
Back to home repairs. Here from Housemaster, a national home inspection company, is a list of major items that are generally checked by inspectors and a range of prices it would cost to replace or repair them:
- Air conditioner compressor, $800 to $1,200.
- Asphalt shingle roof, $1,500 to $2,200.
- Electrical service upgrade, $600 to $1,200.
- Hot water heater, $350 to $500.
- Shower pan, $900 and $1,600.
- Warm air furnace, $1,500 to $1,800.
- Wood shingle roof, $3,000 to $4,000.