The
Basics: Home Buying 101
You need three things to buy a house -- good income, good credit, and some cash. And if
you lack any one of those, sometimes even if you lack two, there is often a way around it.
After all, if you have enough cash, income and credit won't matter. You can simply pay
cash for your home. If that's your situation, in fact, you're in a strong negotiating
position and can sometimes buy at a bargain figure, because you represent a sure thing, a
simple transaction, for the seller.
So what if you have good income and credit, but lack money for down payment and closing
costs? Several options are open to you. For starters, veterans can obtain a VA-guaranteed
loan with no down payment at all. And if you can find sellers who agree, the VA will allow
them to furnish the cash outlay you need, covering everything from bank points to your
prepaid property taxes.
Any buyer can apply for an FHA-insured mortgage, with down payment of less than three
percent. New regulations allow the down payment to be furnished by a relative. Some of
your closing costs (prepaid mortgage insurance premium for example) may be financed along
with the rest of the loan. And a cooperative seller may agree to cover some of your other
costs.
Or perhaps you'll find a seller willing to "take back" financing -- let you
pay month by month on a mortgage, with nothing down and minimal closing costs. You'll need
a sterling credit record and really dependable income before a seller is likely to take
such a chance on you, and it will help if the seller doesn't need immediate cash. Small
income properties owned by elderly landlords who are tired of managing tenants are likely
bets.
In recent years, many new programs have offered special opportunities for those who
can't meet the usual credit qualifications for mortgage loans. Some of these programs are
federal, others are state-sponsored or even local. Some require you to receive credit
counseling and attend education seminars on how to manage money. Your real estate agent
should have information on what's available in your area.