Are you dreaming of owning a home in Dallas, Garland, Plano, or Irving but need more money for the upfront costs? If so, you’re not alone. Many home buyers face the challenge of saving for a down payment and closing costs, which can add up to thousands of dollars. But what if we told you you could buy a house without a down payment or closing costs? Sounds too good to be true, right? Well, it’s not. In this blog post, we’ll show you how you can achieve homeownership faster and easier by taking advantage of some of the programs and options that can help you avoid or reduce these expenses. Read on to learn more!
What are the Down Payment and Closing Costs?
Before we dive into the details, let’s first define down payment and closing costs and how much they typically are for a house in your area. A down payment is the money you pay upfront when you buy a home. It’s usually expressed as a percentage of the purchase price. For example, if you buy a house for $200,000 and make a 10% down payment, you’ll pay $20,000 upfront and borrow $180,000 from the lender. A down payment shows the lender that you have some skin in the game, reducing the risk of defaulting on the loan.
Closing costs are the fees and charges you pay at the end of the transaction when you finalize the deal with the seller and the lender. They include appraisal fees, title insurance fees, origination fees, recording fees, taxes, etc. Closing costs vary depending on the location, type, and price of the property, the lender, and the loan terms. However, they usually range from 2% to 5% of the purchase price. For example, if you buy a house for $200,000 and pay 3% in closing costs, you’ll pay $6,000 at closing.
As you can see, buying a house with a conventional loan requires a lot of money upfront. In fact, according to Zillow, the median down payment in Dallas County was 12.9% in 2020, which means that you would need $25,800 for a median-priced home of $200,000. And that’s not counting the closing costs! Many buyers need help saving enough money for these expenses, especially in today’s competitive market, where prices are rising fast.
How to Buy a House with No Down Payment or Closing Costs
Fortunately, some programs and options can help you buy a house without a down payment or closing costs. These include:
VA loans:
If you are a veteran or an active-duty service member, you may qualify for a VA loan backed by the Department of Veterans Affairs. VA loans offer 100% financing, meaning you don’t need any down payment. They also have no private mortgage insurance (PMI) requirement, which lowers your monthly expenses. And best of all, they have very low or no closing costs, as the VA limits the fees lenders can charge. To qualify for a VA loan, you must have a valid Certificate of Eligibility (COE), meet the income and credit requirements, and buy a property that meets the VA’s minimum property requirements.
USDA loans:
If you are looking for a home in a rural or suburban area, you may qualify for a USDA loan backed by the Department of Agriculture. USDA loans also offer 100% financing and no PMI requirement. They have low-interest rates and flexible credit guidelines. However, they have an upfront guarantee fee and an annual fee, similar to PMI but lower. To qualify for a USDA loan, you must have an income below the median for your area, a decent credit score (at least 640), and buy a property in an eligible area.
Lender credits:
Another way to reduce or eliminate closing costs is to ask the lender to pay for some or all of them, called lender credits or lender-paid closing costs. Lenders may agree to do this if they want to earn your business if they have a lot of profits or competition. However, there is a catch: lenders will charge you a higher interest rate on your loan in exchange for paying your closing costs. This means that you will spend more money over the life of the loan. Therefore, you need to weigh the pros and cons of this option and compare it with other options.
Seller concessions:
Another way to reduce or eliminate closing costs is to ask the seller to pay for some or all of them. This is called seller concessions or seller contributions. Sellers may agree to do this if they want to sell the house quickly if the market is slow or if they have a lot of equity in the property. However, there are limits to how much sellers can pay for your closing costs, depending on the type of loan you have and the appraised value of the property. For example, for FHA loans, sellers can pay up to 6% of the purchase price; for VA loans, sellers can spend up to 4% of the purchase price; and for conventional loans, sellers can pay up to 3% of the purchase price (if your down payment is less than 10%) or up to 6% of the purchase price (if your down payment is 10% or more).
FHA loans:
If you have a low credit score or a high debt-to-income ratio (DTI), you may qualify for an FHA loan backed by the Federal Housing Administration. FHA loans offer low down payment options (as low as 3.5%) and lenient credit requirements (as low as 500). They also have lower interest rates than conventional loans. However, they require PMI for the life of the loan (unless you refinance), which increases your monthly payments. They also have an upfront mortgage insurance premium (MIP) fee and some closing costs. To qualify for an FHA loan, you need to have a steady income and employment history,
How to Qualify and Apply for These Programs and Options
Now that you know some programs and options that can help you buy a house with no down payment or closing costs, you may wonder how to qualify and apply for them. Here are some tips and advice on how to do that:
Improve your credit score:
Your credit score is one of the most important factors lenders consider when approving your loan application. A higher credit score means you are more likely to repay your loan on time and in full. Therefore, lenders will offer you better terms and conditions, such as lower interest rates, fees, and loan amounts. To improve your credit score, you should pay your bills on time, keep your credit card balances low, avoid applying for new credit, and check your credit reports for errors and dispute them if necessary.
Compare lenders:
Not all lenders offer the same programs and options for buyers who want to buy a house with no down payment or closing costs. Therefore, you should shop around and compare different lenders before choosing one. You should compare each loan’s interest rates and fees, charges, points, and other features. You should also check the reputation and customer service of each lender. You can use online tools and calculators to compare different loan scenarios and see which suits you best.
Negotiate with sellers:
As we mentioned, one way to reduce or eliminate your closing costs is to ask the seller to pay for some or all of them. However, this is only sometimes easy or possible, especially in a hot market where sellers have the upper hand. Therefore, you need to be intelligent and strategic when negotiating with sellers. You should know how much the house is worth, how long it has been on the market, its strengths and weaknesses, the seller’s motivations and expectations, etc. You should also be flexible and willing to compromise on other aspects of the deal, such as the price, the closing date, the contingencies, etc.
We can help you buy a house With a Down Payment or Closing Costs.
Buying a house with no down payment or closing costs may seem like a dream come true, but it’s not impossible. Many programs and options can help you achieve homeownership faster and easier by avoiding or reducing these expenses. However, you need to be aware of the pros and cons of each option and choose the one that best fits your situation and goals. You must also prepare financially and emotionally for home buying and work with a trusted professional who can guide you.
That’s where we come in. At Ubicante, we are home-buying and selling experts in Dallas, Garland, Plano, and Irving. We know the market inside out and can access all the programs and options to help you buy a house without a down payment or closing costs. We can assist you in finding the right property, negotiating the best deal, securing the best financing, handling all the paperwork, and closing on time.If you are ready to buy a house in your area with no down payment or closing costs, contact us today! We would love to hear from you and help you realize your dream!
