How to Buy a House with No Money

 

When the odds seem stacked against you, it is essential to remember the variety of options available for those who still want to own a home. Dupage County is a highly desirable county in Illinois, with homes for sale in Oak Brook featuring lush landscapes, cozy architecture, exceptional school districts, and access to lively communities. So for those who are ready to leap but need a bit of a boost, here is how to buy a house with no money.

First and foremost, look at your options. First-time homeowners are often told the traditional approach is the only approach, such as a 20% down payment, perfect credit score, and sizable savings. However, more unconventional but infinitely helpful means of financial support have risen to take their place, making the housing market much friendlier to those who may need help.

Secondly, look to a reliable real estate agent who is experienced in Oak Brook real estate for guidance, such as Jeff Salhani, relying on their expertise in the market and referrals to show you your options.

In short, yes. Having an established credit history is preferable, but not required, with an extensive list of loan types available if you partner with the right lender. What is important to remember is that there is a difference between no credit history and bad credit history. No credit history means there is no financial path for lenders to follow, making you a risk purely because of the unknown. In the eyes of a lender, you and your financial history are one big question mark, causing unease. However, methods can be taken to provide a reliable history of your finances, such as manual underwriting or having someone reliable co-sign the loan, such as a friend, or a family member, as long as they have good credit.

Low credit scores and poor credit history is another matter. It must be noted that only some potential buyers are responsible for their bad credit. Financial abuse, scams, and other factors can cause credit scores to plummet, marking your credit history and muddying the waters for future ventures like homeownership without being purely at fault. However, there are still options available for those who have little to no funds with a low credit score. Before going into the alternative loan types, it may help to have a brief outline of what loans can be offered according to credit score.

 

FHA loans are a loan program created by the Federal Housing Administration under the United States Department of Housing and Urban Development to aid and support those who may not be financially able to purchase a home for 20% down. These loans are exceptionally helpful for first-time homeowners as well as those who do not have the funds or the credit for a conventional loan.

 

Fannie Mae HomeReady mortgages are designed specifically for those with low credit. These loans require as little as 3% down with flexible sources of funds, the option to cancel mortgage insurance (MI), and reduce the amount of MI coverage required for loan-to-value ratios above 90% (up to 97%). The benefit of HomeReady Mortgages is they are low-risk and recognize traditional underwriting methods do not apply to multiple streams of income, thus expanding to more flexible ways to underwrite. Borrowers should be wary of the higher interest rates, borrower income limits tied to area median income, and loan limits depending on how expensive the area is.

 

Freddie Mac Home Possible mortgages have similar features to Fannie Mae HomeReady mortgages, such as income limits set to 80% of the area median income, allowing multiple forms of income, and the full down payment and closing costs not needing to come out of pocket but through gift funds or down payment assistance. What sets Freddie Mac apart is that only rental income can be counted towards the borrowers' application. In addition, the loan-to-value ratio for the mortgage must not exceed 95%.

 

A 97 Loan is closer to a conventional loan. However, its 3% down requirements make it a favorable option. Unlike the previous two options, there are no income limits, and it is perfect for those who may have a good credit score but lower savings or simply do not want to use all of their savings. Another plus is a 97 Loan, named for the loan being 97% of the home’s value, allows borrowers to purchase homes that are of higher value than the FHA loan limits offering buyers a chance to settle in higher quality neighborhoods.

Low funding and low credit should never be a deterrent to finding the home of your dreams for the price you want. There are dozens of other 3% down loan options that tailor exactly to the homeowner, providing the support and eligibility they need. Having a quality real estate agent like Jeff Salhani to walk you through your loan options and connect you to reliable lenders is invaluable when looking for a home. Contact Jeff Salhani for a chance to find the right home for you at the right price.