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Little-Known Ways You Can Buy A House With No Down Payment

by The Schnoor Team

The city where you plan to buy a home may offer loans with no money down.

Can you buy a house with no down payment?

Yes, you can.

“Paying 20% down is, quite frankly, a myth,” says Karen Hoskins, vice president at NeighborWorks and bearer-of-great-news. “Most buyers pay only 5% to 10% down — some even pay zero.”

The key to finding a no-money-down home loan is finding the right assistance program. And there’s no shortage of them if you qualify.

Of the roughly 2,500 home-buying programs tracked by Down Payment Resource, a nationwide database of home ownership programs that helps match buyers and properties, 69% offer down payment assistance.

Even better: The average amount of assistance from those programs nationwide tops $11,000 — though amounts would vary greatly between disparate cost-of-living markets like Southern California and Iowa, according to Down Payment Resource. Some 87% of properties are eligible for some kind of assistance.

Here’s where to find the financial help you need to buy a home:

National Government Programs

Because they’re at the national level, they’re often the ones people turn to first:

  • FHA. Helps first-time buyers — especially those with lower credit scores — buy with down payments as low as 3.5% (low-down).
  • USDA Rural Development Loans. For low-to-middle income families buying homes in towns with populations of 10,000 or fewer people or that are “rural in character.” That means some areas with bigger populations have been grandfathered into the program (zero down).
  • VA Home Loans. Helps service members, veterans, and eligible surviving spouses (zero down).
  • Government-sponsored enterprises. Fannie Mae and Freddie Mac, which set the rules for mortgages nationwide, both offer programs allowing eligible buyers to put down as little as 3% of the purchase price. That’s even lower than FHA (low-down).

But those aren’t the only options. Too often, buyers neglect to look for help locally, which may offer even better assistance.

State and Local Home-Buying Programs

Responsible homeowners are vital to a community’s stability and economic health, so municipalities and states have a vested interest in helping you buy a home — even if you don’t have the down payment.

Qualifications vary based on the agency or the community requirements, but assistance programs generally:

  • Have income limits
  • Have purchase price limits
  • Require participants to take home buyer counseling

Other requirements — like whether you’re a first-time buyer, how good your credit is, where you have to buy, whether you have to rehab the home, or if you need to be part of a group, such as active military, veterans, or teachers — depend on the program.

Assistance comes in these forms (Note: Specific programs named as examples below may change or close over time.):

Forgivable loans and grants. These are literal gifts for some or all of the down payment and closing costs, which means there’s no recorded lien or mortgage on that money. Eligibility and terms will vary and funds are limited. Example: The National Home Buyers Fund, Inc. offers down payment and closing cost assistance up to 5% of the mortgage loan amount as a gift or zero-interest second mortgage that’s forgiven after three years.

Second mortgages. As the name suggests, these loans are in addition to your primary home mortgage. They take a variety of forms, and the differences can be confusing. The most important thing isn’t the terminology, though; it’s knowing they exist, because they can offer substantial down payment assistance (DPA) and favorable terms.

  • Soft mortgages. These DPA loans are deferred for some period of time based on a particular program’s requirements. Occasionally, they’re forgivable. Example: The Home Purchase Assistance Program in Washington, D.C., defers payments for five years for moderate-income borrowers.
  • Silent seconds. DPA repayment is deferred until you sell or refinance. The city of Napa, Calif., for instance, offers eligible first-time buyers up to $58,000 or 30% of the purchase price, whichever is less, at 1% interest. The loan can be deferred for the 30-year term if you stay in the home.
  • Hard seconds. You start paying off the DPA loan as soon as you close. Programs offer a variety of loan amounts and interest rates (some below-market) depending on your eligibility.

First mortgages at below market interest rates. Local and state agencies subsidize a mortgage to make it more affordable for the buyer by reducing the interest rate, or offering 100% financing (which means no down payment), and sometimes waiving mortgage insurance, too.

Mortgage credit certificates (MCCs). Issued by some state or local governments, MCCs allow taxpayers to claim a tax credit (Form 8396) for some portion of the mortgage interest paid during a given tax year. A credit, unlike a deduction, is a dollar-for-dollar savings on your tax liability.

You don’t have to itemize to use this credit, according to Greg Zagorski, senior legislative and policy associate at the National Council of State Housing Agencies. It’s capped at $2,000 per year, and you can claim it throughout the life of the loan.

A cool tax benefit of MCCs is that if your tax liability one year is lower than the credit, you can roll over the amount you can’t claim to the next year. If you make more the next year (and therefore have more tax liability), you can claim what you couldn’t before.

How to Find a Program You Qualify For

  • Housing counselors, who are free (!) and can discuss what mortgage options are best for you, are available through housing finance agencies and organizations like NeighborWorks. Find HUD-approved housing counselors by state here. Or contact your state’s housing finance agency.
  • Check your eligibility for a host of DPA programs at Down Payment Resource.
  • Find a good mortgage broker, who should have information about down payment programs in your area and can help you determine your eligibility.
  • Talk to your real estate agent.

A final note: When you put down less than 20%, you pay private mortgage insurance (PMI) each month to protect the lender’s interest. On the other hand, not having to save up for a 20% down payment can get you into a home a lot faster. And you can cancel PMI (except for FHA loans) once you reach 20% equity.

Source: "Little-Known Ways You Can Buy A House With No Down Payment"

How We Bought a New House Before Selling Our Current House

by The Schnoor Team

And used a VA loan, which has more restrictions than a conventional one.

Name: Jena and Mark Boomhower, both 36

City: Battle Ground, Wash.

Year of Home Purchase: 2018

Sale Price: $412,000

Home style: 2014 modern Craftsman single-family home

Profession: Jena is a medical technician; Mark is a supervisor for TSA

Mark and Jena Boomhower’s 1,400-square-foot starter home was just right when their daughters, Tanahleigh and Adalyn, were tots. But as the girls got older, Mark and Jena realized they needed a bigger house and yard. They wanted a two-story farther from the city, but there were a few challenges.

First, they had to figure out how to buy a house before selling their current house. Second challenge: Buying a house with a VA loan. VA loans offer competitive interest rates and don’t always require a down payment or private mortgage insurance. But VA loans limit what buyers are allowed to pay in closing costs, and sellers don’t necessarily have to pay them, either. Closing costs become a big part of the negotiation. Here’s their story.

When did you realize you needed more square footage?

Mark: When Tanahleigh started having her friends over. If they all wanted to watch TV in the living room, we had to go to another room. I would go hang out in the garage. Jena would hang out in the kitchen. We were like, “OK, we’re stepping on each other in this little house.”

So what’s the first thing you did to escape your exile in the garage?

Mark: I called our agent and told him our plan: that we wanted to buy a new house but not until we sold our current house. And that we wouldn’t sell our current house until we had one to move into because we didn’t want to spend weeks or months in a hotel with two kids and a dog. And we wanted to buy with a VA loan. Our agent said that our stipulations were tough but that it could be done.

You faced a seller’s market. Houses were going fast. What did you do first: shop for a new house or list your old one?

Mark: We started looking at houses. We looked at three or four. The last one we looked at, I don’t think Jena stopped smiling after we walked through the front door.

Jena: Yes. It was perfect.

How perfect was it?

Mark: So perfect that we put an offer on it, even though our old house wasn’t even listed.

This all sounds so simple. Did they take the offer?

Mark: No.

Jena: They countered at a higher price. They were asking $409,000. We offered $400,000 with $10,000 in closing costs. They came back at $418,000 with $10,000 in closing costs. They raised the price to cover closing costs.

Mark: We thought it was ridiculous.

Jena: We walked away.

Oh no, those VA loans and their non-allowable fees! It was your perfect house!

Jena: We went through the whole weekend and couldn’t get the house off our minds.

Mark: We talked to our agent, Dale Chumbley. We talked with our lender. We realized we would have to pay a higher price for the house and less of the closing costs, or a lower price for the house and more of the closing costs.

Jena: We went with paying more for the house and less of the closing costs. So we made another offer: $410,000 + $7,000 closing costs. We wanted to walk away with the most bucks in our pocket, so we went with them paying more of the closing costs.

Did this offer go better?

Jena: Yes. They countered with $412,000 plus $7,000 in closing costs.

Mark: We weren’t going to lose the house over $2,000. Jena crunched the numbers, and it would add less than $50 a month to our payment. So we took the offer.

Great! You got the house! But you still had to sell your house. With the same agent, right?

Jena: Right. Our offer was contingent on us selling our old house in 30 days. And once the seller accepted our offer, we had 48 hours to get our house on the market.

Mark: So we had two days to get our house ready to sell. We picked up, cleaned up, threw things out. It was a tornado of excitement and anxiety. But we got it done and were ready for showings.

The clock was ticking. You had 30 days to sell. How did it go?

Mark: We weren’t getting many showings, even though it was a seller’s market. We had just two people come by the first week. We were in full-blown panic mode. We were worried because we could lose the new house while we waited for our house to sell. [Under regional MLS rules], if someone came by with a better offer for the new house during the 30 days, the seller could accept it. So we were worried.

Jena: After about two and a half weeks, we finally got an offer — a little under what we were asking, but they were buying with a VA loan, too, so we took a lower price and they paid closing costs the VA wouldn’t cover.

On what day of the 30-day period did your old house sell?

Jena: Day 24.

You did that with a week to spare!

Mark: Everything had to be perfect for this to work. It seemed like an ordeal to us. Our agent said it went really smooth. He said he’d never seen a transaction line up like ours did. We wouldn’t have stayed sane through it all without him telling us it would work out and telling us what we should do.

What’s your advice to a home buyer facing a similar situation?

Jena: Be patient.

Mark: Make sure you have a competent agent, one you can trust.

Jena: The agent we worked with, Dale, sold us our first house.

Mark: He became a family friend. He bought, I’m not kidding, hundreds of boxes of Girl Scout cookies from my daughter.

Jena: We totally trusted him and everything he said.

Source: "How We Bought a New House Before Selling Our Current House"

 

The Ins and Outs of Setting a Price for Your Home

by The Schnoor Team

It’s a big decision with a lot of factors, but don’t worry — you have backup.

Everything has value. Especially your home.

And when it comes to selling your home, assigning a price to that value is complicated. You made memories there. You’ve got a major financial interest in the place, too.

Buyers think of value, but they’re more concerned with price. And your home’s price is one of its most attractive — or unattractive — features. The right price can attract buyers, quickly. The wrong price may mean the house sits on the market, which can create the vibe among buyers that there’s something wrong it. (If the home buying process is Instagram, think of a wrongly priced home as a photo that isn’t getting any likes.)

It’s your agent’s job, as the real estate expert — mining his or her expertise and knowledge of the market — to determine the best price for your home. But it’s your house. You need to have your own idea of how much your property is worth. Here’s how to get it.   

Work With Your Agent

This is crucial. Your agent brings the right mix of industry expertise and knowledge of your local market to the table.

To understand whether your agent is pricing your home properly, read through each of the steps below. Use what you learn about your home’s fair market price to evaluate any price your agent recommends.

Throughout the pricing process, a good agent will:

  • Listen to your needs
  • Take into account your research
  • Use his or her knowledge of the local market to help you pick the best asking price

You’re a team. It’s in both of your interests to price your home correctly — a timely, profitable sale is win for everyone.

And Yeah, You Should Also Check the Internet

Pricing a home is both art and science. To understand what will inform your agent’s pricing decisions — and to be prepared to bring your own educated input to the conversation — start with a pricing research phase.

This includes taking advantage of online estimating tools — but only to an extent. Property websites like realtor.com® and Redfin enable you to plug in your home’s address to see approximately how much your house is worth. They base their estimates on your home’s square footage and real estate data they’ve collected, such as recent home sales in your local market.

But those results are estimates based on generalized factors, not your unique situation. If at any point the price you see in an online calculator doesn’t align with what your agent suggests, prioritize the agent’s advice.

Online estimators also have a reputation among real estate professionals for misleading buyers and sellers alike with less-than-optimal pricing information. But as a starting point, they have their utility.  

Know Your Local History

What your home’s listing price should be largely depends on what similar homes, or “comps,” recently sold for in your area. To price your home, your agent will run the average sales prices of at least three comps to assess your home’s value.

What constitutes a comp? A number of factors, including a home’s:

  • Age
  • Location
  • Square footage
  • Number of bedrooms and bathrooms

Agents will look into the difference between each comp’s listing price, and the price it sold for. He or she will consider price reductions and why they happened, if relevant. All the while, your agent will also rely on inside knowledge of housing stock and the local market. That nuanced understanding is invaluable, particularly when measuring the unique aspects of your home with raw data about comps.

When selecting comps, agents generally look for properties that sold within a one-mile radius of your home, and in the past 90 days. They find these homes using the multiple listing service (MLS), a regional database of homes that agents pay dues to access.

Size Up the Competition

In addition to recently sold homes, your agent will also look at properties that are currently for sale in your area. These listings will be your competition. But because listing photos don’t always tell the full story, a good agent will check out these homes in person to see what condition they’re in and to assess how your home sizes up.

You can do the same. For additional perspective, you can also get in touch with your local association of REALTORS®. Ask if they have information to offer about your neighborhood and the local market.

Understand the Market You’re In

The housing market where you live can greatly impact your pricing strategy.

If you’re in a seller’s market, where demand from buyers outpaces the number of homes for sale, you may be able to price your home slightly higher than market value.

But if you’re in a buyer’s market, where buyers have the advantage, you may have to price your home slightly below market value to get people interested.

You can see local market trends by checking the online resource realtor.com®. It offers charts that display important housing market data, such as a city’s average listing price, median sales price, and average days a home is on market. It’s a lot of information. At any point, you can ask your agent to help you make sense of how your local market will influence your home’s price.

Put Your Feelings Aside

As previously mentioned, many sellers think their home is worth more than it is. Why? Because memories. Because sentiment. Because pride.

But you have to stay objective when assessing your home’s value. Buyers, after all, won’t know your home’s personal history. What makes your home special to you may not be something that entices them. Read: They may want to convert that craft room you worked so hard to perfect into a man cave.

The lesson: As much as possible, set aside your emotional attachment to your home. It will make it easier to accept your agent’s realistic, clear-eyed calculation of its price.

Remember: It’s All Relative

As you and your agent are talking price, the local market may throw you a curveball or two.

In some markets, for example, it could make sense to price your home slightly below its fair market value to spark a bidding war.

Of course, there’s no guarantee a pricing strategy such as this will pay off. Similarly, there’s no one-size-fits-all playbook. Your home should be priced for its own local, or even hyper-local, market. Period. Confer with your agent before you decide to try any market-specific pricing tactics.

Be Savvy With the Dollar Amount

Pricing your home requires careful attention. In some cases, fair market value may not be precisely what you should list it for — and the reasons can be subtle.

For example, if comps show that your home is worth $410,000, setting that as your asking price can backfire — the reason is that buyers who are looking online for properties under $400,000 won’t see your home in search results in that case. This explains why many agents use the “99” pricing strategy and, for example, list $400,000 homes for $399,000. The idea is to maximize exposure.

Have a Heart-to-Heart With Your Partner

Not the sole decision maker in your household? Talk to your partner about your home’s price before it’s listed. You can use this worksheet as a guide for that discussion.

The reason isn’t just to foster the kind of open communication that’s important to any relationship. It’s that if you’re not on the same page about price or the other things that are important to you about sale, each subsequent step of the selling process will be impacted by that tension.

Keep Your Head in the Game

You’ve considered your agent’s advice, and the two of you have agreed on the right price for your home. Hey, champ! Your house is on the market.

Even after the listing date, price should be an ongoing discussion between you and your agent. Markets are fluid, so it’s possible that you’ll have to make tweaks.

In any case, it’s important to to stay in continuous dialogue with your agent, the MVP of Team Sell Your House. Together, keep your eyes on the price.

Source: "The Ins and Outs of Setting a Price for Your Home"

 

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