You need three things to buy a house — good income, good credit, and some cash. And if you lack any one of those, sometimes even if you lack two, there is often a way around it.
After all, if you have enough cash, income and credit won’t matter. You can simply pay cash for your home. If that’s your situation, in fact, you’re in a strong negotiating position and can sometimes buy at a bargain figure, because you represent a sure thing, a simple transaction, for the seller.
So what if you have good income and credit, but lack money for down payment and closing costs? Several options are open to you. For starters, veterans can obtain a VA-guaranteed loan with no down payment at all. And if you can find sellers who agree, the VA will allow them to furnish the cash outlay you need, covering everything from bank points to your prepaid property taxes.
Any buyer can apply for an FHA-insured mortgage, with down payment of less than three percent. New regulations allow the down payment to be furnished by a relative. Some of your closing costs (prepaid mortgage insurance premium for example) may be financed along with the rest of the loan. And a cooperative seller may agree to cover some of your other costs.
Or perhaps you’ll find a seller willing to “take back” financing — let you pay month by month on a mortgage, with nothing down and minimal closing costs. You’ll need a sterling credit record and really dependable income before a seller is likely to take such a chance on you, and it will help if the seller doesn’t need immediate cash. Small income properties owned by elderly landlords who are tired of managing tenants are likely bets.
In recent years, many new programs have offered special opportunities for those who can’t meet the usual credit qualifications for mortgage loans. Some of these programs are federal, others are state-sponsored or even local. Some require you to receive credit counseling and attend education seminars on how to manage money. Any good real estate agent should have information on what’s available in your area.
Written by Edith Lank