An additional reason why many people are unable to purchase their first home
is because they do not have money for a down payment. Fortunately, there are
several first time home buying programs and down payment assistance programs to
help. Future home owners should contact local lenders and ask for information
about “no money down home loans.” In most cases, home buyers are required to
attend a home buying workshop before they are eligible to receive assistance.
Real estate agents and online mortgage brokers also offer helpful information
on receiving home loans with zero down
The downside to home loans with zero down is that many have income
restrictions. This is great for lower income individuals, but not good for
everyday hard working individuals. Nonetheless, mortgage brokers are generally
willing to diligently search for loans for individuals with little or no money
for a down payment. Those interested in buying a home with no money down should
be aware that these home loans may carry a higher interest rate. Many lenders
consider “no money down” candidates risky. Thus, they increase the interest
rate of a loan to compensate. To avoid a higher interest rate, future home
owners may consider adjusting their spending habits to save money. A down
payment of as little as $2,000 can make a difference.
Seller Financing
Seller financing is the perfect alternative for individuals who are unable
to receive traditional financing for a home loan. In this case, the seller acts
as the lender for the property. Instead of making payments to the bank, the new
owner will make payments directly to the seller. The buyer and seller will
agree on financing terms which are normally shorter than a traditional
mortgage.
At the end of the term, the buyer will likely owe a balloon payment
for the property. Seller financing is great for individuals who are rebuilding
their credit. They agree to seller financing for three or four years to allow
time for credit improvement. Once their credit is acceptable, the buyer will
finance the balloon payment with a traditional lending institution. They use
the money to pay-off the original owner, and begin making regular payments to
the bank.