As a Realtor I often hear the following from potential home buyers:
“Can I purchase a home without any out of pocket money?”
“How much money do I need to purchase a home in today’s market?”
How much money do I need to purchase a home in today’s market and Can I purchase a Home without any out of pocket money?
The answer really depends on the type of loan you qualify for.
VA Loan – If you currently serve in the military or you are a veteran you can use your VA eligibility and purchase a home with ZERO down payment. With a VA loan you do not have to pay a down payment and if you can negotiate closing cost assistance from the seller you have a good chance to purchase a home without having to bring money to the table! YEAH.
VHDA This is a loan through FHA that also does not require a down payment. You are reading this correctly ZERO down payment with a VHDA loan. VHDA has income restrictions. For more details on VHDA and to see if you qualify please click here
FHA This has been a very popular loan over the past few years as it is widely available and offers the lowest down payment 3.5 % . FHA will also allow you use gift money for the down payment. So for example if your parents or anyone else close to you give you gift money to use for a home purchase, FHA has a process for that.
Conventional Financing This type of financing requires anywhere from 5 % – 10 % for primary residence and for investment properties 20 % to 25 %. Conventional Financing has its advantages in today’s market as it is less expensive for the seller and generally also has fewer restrictions when compared to FHA and VA.
CASH Cash is King. Cash transactions can close much quicker then financed transactions.
To figure out which loan program will work for you and what you will qualify for you should contact an lender immediately. Click here to apply for a Loan.
Let’s not forget the CLOSING COST!
When you purchase a home there will be closing cost that the buyer will have to pay, but NO WORRIES! The buyer can ask the seller for closing cost assistance. Speak with your Realtor to come up with a strategy. You can purchase a home without having to pay a down payment or closing cost. The last few buyers that I worked with didn’t have to pay a down payment or closing cost.
What are the out of pocket costs to a buyer?
When you make an offer the seller will require an Earnest Money Deposit. In the Woodbridge Virginia area the Earnest Money ranges anywhere from $1000 – $7000. The higher your Earnest Money payment the more serious the seller will take your offer. After your offer is accepted and you are on your way to home ownership the Earnest Money will be deposited in an escrow account until closing and then applied to your funds.
Home Inspection
This will be your next out of pocket cost. Within a couple of days (generally 10 days or less) a Home Inspection will be conducted. You will pay the Home Inspector after the inspection generally by check. The Home Inspection will cost anywhere from $ 200 – $ 700 depending on the home that you are purchasing.
Appraisal
Most of the time the cost for the appraisal will be paid at closing. However your lender might ask for a credit card to secure the cost for the appraisal. Cost of the appraisal is anywhere from $ 300 – $ 600.
Homeowners Insurance
You will have to apply for homeowners insurance. With most insurance companies the insurance will be paid at closing, in some instances you might have to pay the insurance upfront.
So I guess the answer to the question can I purchase a home without any out of pocket money is YES and NO. You will always need money for items such as, Earnest Money Deposit, Home Inspection, Appraisal or Insurance, but if your Realtor can negotiate closing cost assistance for you and you qualify for one of the ZERO down payment loans the answer would be yes.