As an investor, and creator of an investor training course, ("The Simple Man's Guide to Real Estate") this is a question I am asked almost daily. And while some things have changed, it is still possible to become a homeowner without having to come up with a chunk of cash for a down payment. In fact, there are several methods, but detailing them would make for a book, not an article post. Still, I can get the idea across.
OPTION #1 - Find a suitable home that is either a rental or vacant - this tells you the owner does not necessarily need cash to buy another home - he already has one. You would then attempt to buy the property using a contract for deed (assuming there is no contentious "due on sale" clause to deal with). Since you are buying and not renting, your monthly payment goes to the purchase price - you offer to pay the seller the same amount you would be paying if you got an 80% mortgage, plus you would pay property taxes and insurance. The term of the agreement would be long enough so you will be applying 20% against the purchase price. With 20% down, you avoid costly PMI (private mortgage insurance).
EXAMPLE: Seller has a $150,000 home. You agree to pay $644.19 per month, which is what your mortgage payment would be on $120,000 at 5% for 30 years. In 4.6 years you will have applied $30,000 to the purchase price - and that is your 20% down payment. You then get a mortgage for the $120K balance to pay off the seller. Your mortgage payment continues to be $644.19/month. You now own the home. Technically you did make a down payment, but not in a single lump sum.
OPTION #2 - Get a lease with option to buy, with the right to sublet. Try to get the seller to apply 20-25% of your lease payment to the purchase price, with a term long enough to provide your down payment. You lease the property to a tenant during the option period. The money applied to your down payment is courtesy of your tenant. When sufficient funds have been applied, you exercise your option to buy and choose not to renew the tenant's lease (let him know in advance that this is your plan). You now own a home and your tenant made your down payment for you.
OPTION #3 - Can you offer a service the seller wants? I once agreed to build a new deck on a sellers new home in exchange for the down payment. A dentist could offer dental services to the seller's family. You get the idea - it's called barter. And it still works for many people.
OPTION #4 - Let the down payment come from the land. The home I currently live in is situated on over 13 acres, which was mostly standing pine - BIG pines. Before I closed on the house I contracted the timber rights to a local lumber yard. There was more than enough to make the down payment, and I got the land partially cleared for the small farm I wanted. The lumber yard owner put a certified check into my escrow, and I put in the agreement for the timber rights. At closing, he got the timber rights, I got the certified check which made the down payment and covered my closing costs.
The point is this - with a little thought and ingenuity, it is still possible to buy a home without having to cough up a ton of cash.
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