How to Buy a Home with (almost) No Money

Is it possible to buy a home with no money out of pocket?  The short answer is “yes”.

Although each specific loan program has many criteria for qualification (credit score, income, assets, liabilities, etc.) there are several options available in the South Metro Area.  Here are three of them:

USDA Rural Development

This is truly a ZERO DOWN loan program.  It is available in the smaller communities like New Prague, Jordan, Belle Plaine, Elko/New Market, and Lonsdale.  There is an income limitation of 115% of the area’s median income, which ranges from $80,700 to $92,600 for a 1-4 person household.

Federal Housing Administration

An FHA loan is a very common loan, and is available in the smaller communities, as well as the larger cities of Shakopee, Prior Lake, and Savage.  There is a 3.5% minimum down payment requirement, but it is allowed to be gifted from a relative.  There is a lending limit in place of $365,000 for Scott County, and $271,050 for both Rice and Le Sueur counties.

FHA 203K

If you are purchasing a home that would be classified as a “fixer-upper” FHA has a rehab loan available.  With a 203k loan, you get a single loan that includes the purchase price, as well as improvement costs.  Depending upon location, FHA allows up to 110% of the homes projected value after improvement.  It is important to note that the work needs to be done by a reputable contractor of your choice, and must be done within 6 months of closing.

Closing Costs

A common way to cover your buyer closing expenses, is to ask the seller to simply pay them for you.  Generally buyer closing costs are around 3% of the home purchase price.  For a seller asking $200,000 for their home, a buyer could increase the purchase price to $206,000 to keep the net purchase price to the seller at $200,000, OR offer $200,000 and ask the seller to pay the 3% for buyer closing costs.  It is important to note that in the second example, the net purchase price to the seller is reduced to $194,000, or in effect, $6,000 less for the buyer!

For additional loan programs, and information on the three outlined above, contact a reputable Realtor with an experienced financing team.