Sunday, February 21, 2010

I wanna buy house but dont have money for a down payment?

I was telling someone that and she said if I dont have the money to put down on the house that I should take over someones elses mortgage if they about to lose their house. I dont know how to go about that. Where Iam living now I pay 1400 everymonth always on time with my payment. and I have a 3bedroom apartment What do you guys think?I wanna buy house but dont have money for a down payment?
Isn't this how the housing crisis got started?I wanna buy house but dont have money for a down payment?
I think that if you cannot afford the down payment, then you CANNOT afford the house.
That's easy. Not a plug--I'm not providing any link--but I recently wrote an e-book on the subject: ';How You Can Buy A Home With No New Mortgage.';





Techniques include lease-option, lease-purchase, contract for deed, wrap mortgage, equity sharing, subject to, and land trusts.





In your case, your friend was talking about buying a house ';subject to'; the existing mortgage. The problem with that strategy is that you'll have to make up any arrearages (amounts owing). And a lot of people in that situation have pretty bad mortgages to begin with. That technique WILL work if there's equity in the property, but you'd still have to make up any amounts owed. The technique, in short, is that someone just signs the deed over to you. The mortgage stays in the seller's name. You promise to bring the payments current and, at some point in the future, refinance to get them off the mortgage.





Since you don't have money for a down payment, you probably ought to consider a lease-option or equity share...or possibly becoming the resident beneficiary in a land trust put together by an investor.





In a lease-option, you lease a property with the right to buy it at a future date (when you do have the money for the down payment). In an equity share, you purchase the property with an investor who puts up the cash for the down payment in return for partial ownership of the property. In a land trust, you lease the property; an investor puts up some cash; and in the future you have the right to buy the property, sharing any profits or equity with the investor.





There's plenty of information online about lease-options. Equity sharing was real big in the 1980s, and there's still information about that around. For the land trust information, go to http://www.landtrust.net





Hope that helps.
You might find a ';rent to own situation'; particularly from somebody who has lost their income, can't sell their house cause of the soft market, and the difference between the mortgage payment and its rental value isn't to much. You make a contract where you pay above market rent but part of your rent goes to a down payment. After a period of time you get to buy the house at the price you agreed on in the beginning and your saved up down payment is applied





Be careful. It's not without risk if the house gets foreclosed on and the owner goes bankrupt you may never see any of the money. In areas of the country where the housing market really boomed most distressed homeowners in this situation are too far upside down to make this work. But if you live in a part of the country where housing didn't boom as much you might be able to.





Another danger is if the prices continue to fall you may be obligated to buy the house at a higher price than its current value when your rent to own agreement comes due.





Also be aware of scams. Sometimes con men who don't even own the house will advertise ';rent to owns';scam usually in Pennysaver circulars or lately on Craig's list.





Most commercial mortgages made in recent years are not assumable and were made at higher rates than a new mortgage would cost right now. Even if you find an assumable you still have to qualify on income and credit. The days of accelerating, no down,and stated income mortgages are pretty much gone and its a good thing. They helped bring down the economy by getting people into houses they were never going to be able to afford.





In general, assuming you have NO other debt and adequate income, a monthly payment (PITI principal, interest, taxes and insurance) of 1400.00 will get you a mortgage of about 175,000 in most parts of the country right now. That will be after whatever down payment was required or assuming 20% down roughly a 210,000 house. Your monthly income should be 2.5 to 3 times that or 4000.00 after taxes. Make sure your job is secure. There is no point in ';shoe horning'; your self into a house only lose it a 6 months or a year later.





All in all it sounds like it would be a stretch for you to do anything in the current market. Go see a Realtor and get your self pre-qualified for a mortgage. They will usually do it for free and tell you exactly what you can afford with your income and credit. Then you will at least know what you have to save and plan for.





In a time when housing prices are still falling I would suggest you save your money for a down payment and wait.
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