Buying a house with 0 money down? :confused:

[N8Magic]

I was just looking in the local paper, as I would like to buy a house/condo/townhouse at the end of the summer.

Amongst the ads, there is one advertising "Stop paying rent and own your own home. 0% Down and No First Payment."

How does this work? I thought the minimum downpayment was 10% (5% for new homeowners), and even then you are paying out the arse for Mortgage Insurance...

So anyone know what the catch is here?

 

[Cerebus451]

There are lots of ways to do this. It has to do with who is backing the loan. If it is an FHA loan, then 5% is the minimum down payment, but lenders can go other routes. I had a friend that wanted a house, but could not put up a down payment. His resulting mortgage was front-loaded with a lot of interest, and he was paying a higher PMI, but he did not have to front a down payment.
Another possibility is if it is a developer that has a lot of houses that are sitting unsold, they are paying interest on their construction loans and want to unload. They might actually be fronting the downpayment. That's rare, but it does happen.
Lastly, if you are a veteran, VA loans have a 0% minimum downpayment (and no PMI as well).

 

[RossMAN]

You may want to edit your thread title and remind people that you're in Canada.

 

[StageLeft]

<< You may want to edit your thread title and remind people that you're in Canada. >>

Don't you mean tax-land?

 

[N8Magic]

<< You may want to edit your thread title and remind people that you're in Canada. >>



I'm sure the laws are pretty much similar.

 

[RossMAN]

<<

<< You may want to edit your thread title and remind people that you're in Canada. >>



I'm sure the laws are pretty much similar. >>



You're going to be getting advice from probably 95% Americans.

Quizno's rules BTW.

 

[Ameesh]

<< You may want to edit your thread title and remind people that you're in Canada. >>

 

[RossMAN]

Here's a good thread if you haven't already seen it.

 

[N8Magic]

<<

<<

<< You may want to edit your thread title and remind people that you're in Canada. >>



I'm sure the laws are pretty much similar. >>



You're going to be getting advice from probably 95% Americans.

Quizno's rules BTW. >>



I know, but that's OK.

... and I may go to Quizno's for dinner tonight.

 

[Cerebus451]

<< You're going to be getting advice from probably 95% Americans >>


Yeah, the FHA and VA comments of mine would appy U.S. only, but it is probably a similar situation in the Great White North. The mortgage lenders are getting backing from somewhere, and it is this somewhere that dictates the terms they can use for lending.

 

[Yo Ma Ma]

If you have a motivated seller, you can obtain something like a kick-back at closing. Our buyer did this when we sold our house in January and essentially bought the house with no money down (since she used the 'kick-back' as her down payment).

 

[charrison]

If you have good enough credit you can finance 103%(loan+closing costs) of value of the house. This can be attractive if you do not have much in savings.

 

[N8Magic]

<< If you have good enough credit you can finance 103%(loan+closing costs) of value of the house. This can be attractive if you do not have much in savings. >>



Even as a first time buyer?

 

[SALvation]

Sure you put 0% down but be prepared to bend over extra far every month for the next 30 years.

 

[wnied]

Now what I wanna know about, are these programs you see on late at night when vampires like myself are trying to settle in and wonder how its possible to make my second million in these real estate schemes i see them touting on and on about...

Can anyone enlighten me?

~wnied~

 

[jcuadrado]

seller contributions...upping the amount of the loan as long as the appraisal comes back higher than the selling price...

It's done all the time...for example..

Selling price of home - 100,000
Appraisal - 110,000

Actual loan amount 108,000

There's 8 g's there to play with (closing costs or whatever).

My down was only 1.5%..

 

[vi edit]

<< Sure you put 0% down but be prepared to bend over extra far every month for the next 30 years. >>



How many people who actually do a 0% actually plan on staying in that house for 30 years?

Answer: Not too damn many.

Most people who can't afford to put 10, 20, 30 thousand down on a house are young and/or first time home buyers. They will be in that house for a max of 10 years before they move out. Plus, with the 10's of thousands of dollars they save by not putting down a big up front payment, they can put the money to better use by knocking out short term, and higher monthly payments of debt.

When the interest is tax deductable, it's not such a bad thing. Having debt from owning a home IS NOT a bad thing assuming you can comfortably make the monthly payments.

 

[compuwiz1]

VA is one way to get zero down, but also loan to value plays a significant role in those 100% loans, as does the quality of one's credit. A friend of mine recently bought a rental, financed 125% of appraised value, then went on to use some of the cash out he recieved to leverage himself into another property as well. Of course, this is a guy that could borrow $100K on his signature about any time he wants, since his credit is that good.

 

[kgraeme]

<< Plus, with the 10's of thousands of dollars they save by not putting down a big up front payment, they can put the money to better use by knocking out short term, and higher monthly payments of debt. >>



How about when they have no short term debt and plenty of money to meet the monthly payments?

 

[charrison]

<<

<< If you have good enough credit you can finance 103%(loan+closing costs) of value of the house. This can be attractive if you do not have much in savings. >>



Even as a first time buyer? >>



Yup, planning on doing it this summer

 

[charrison]

kgraeme,

Put 20% down and avoid PMI on your note payment.

 

[thedarkwolf]

Bought a house back in Sept with 0% down going through FHA. They give you a defered loan of up to $5k to help cover the down payment that you don't have to start paying back for 5 years and has 0% interest over that 5 year period. I can't remember what the interest rate was once you start paying it back but it wasn't much. I actually walked out of the signing with a check for $300 .

 

[cavingjan]

I just want to point out two things:
1. you will have some closing costs that you as the buyer have to pay. Depends upon your state/county/country what you will need to pay and obviously these totals will be different from one sale to another. (Example: my county required me to pay for the pest inspection and the surveying and I could not roll them into the loan - $300 total I think)

2. (And more importantly) do not sweat the PMI payments because you did not put 20% down. There are a couple ways to get around it in the long run. You could refinance (with a good appraissal you could possibly get rid of your PMI payments within the year if your appraisal went up enough even with 0% down) or you could sell the house and buy another one. More people stay at one job for their entire employment carreer (ignoring those summer jobs in college, etc) than buy and keep a house for the life of their loan. If you are in a situation where you are putting 0 down, more than likely you are just getting a starter home that you will only keep for 5 to 8 years.
If you wait until you have 20% down and you are currently paying rent with onely a little extra money, by the time you get to the 20%, house prices have gone up that you still aren't there. Better to pay the extra PMI and build equity than dump several years worth of rent money in someone else's pocket.
A coworker recently refinanced his mortgage at a higher interest rate than it was. He was able to get rid of the PMI but only saves $20 a month payment wise. But the extra amount is in interest that he can write off. This is his second home and he is planning on keeping it.

 

[rahvin]

<< Most people who can't afford to put 10, 20, 30 thousand down on a house are young and/or first time home buyers. They will be in that house for a max of 10 years before they move out. Plus, with the 10's of thousands of dollars they save by not putting down a big up front payment, they can put the money to better use by knocking out short term, and higher monthly payments of debt.

When the interest is tax deductable, it's not such a bad thing. Having debt from owning a home IS NOT a bad thing assuming you can comfortably make the monthly payments. >>



Paying PMI is stupid. PMI provides no value or benefit to the homeowner and is essentially wasted money. With PMI running into the hundereds of dollars for a good size mortage with 0 down you are better off to save your money till you have a down payment.

 

[cavingjan]

<< Paying PMI is stupid. PMI provides no value or benefit to the homeowner and is essentially wasted money. With PMI running into the hundereds of dollars for a good size mortage with 0 down you are better off to save your money till you have a down payment. >>



Need to think it through. Yes PMI is bad but if you are going to wait 8 years before buying a house (assuming you don't have another big money burner come along like kids), you just wasted 8 years worth of rent with no equity built up. Two ways to cut the same pie. Just determine which is better for your situation.

(I pay $35 a month on PMI. I'm planning on keeping this house for only 5 years so yes I will be wasting $2,100 in PMI payments but considering I already have $8,000 in equity because I paid that much lower than the appraisal. Plus the fact that the average house price for my neighborhood has gone up $15,000 in the last 3 years.)

If you are planning on keeping the house for the long term, then PMI does not make sense unless you plan to refinance later (possibly at a higher interest rate).