How to Buy a New Home for Nothing Down

In the United States, the best way to begin to accumulate wealth is to own your own home. Many people rent instead of becoming homeowners because they fear being turned down for a loan and they don’t have enough money for a down payment. Here are some steps that will help you get over making someone else wealthy instead of creating the cornerstone to your own financial portfolio.

Instructions

1. Look for a mortgage lender to arrange to be pre-approved before attempting to buy a home. Mortgage lenders do not all work the same way or target the same market. Some lenders target bankrupt people, inexperienced buyers or anyone with a low credit score so they can charge high interest rates. The lender you choose must be capable of underwriting a Federal Housing Administration (FHA) loan.

2. Learn the FHA loan limit for your area and be sure the loan you are seeking doesn't exceed that limit. Once you know what your loan limit is, simply contact an FHA mortgage lender and inquire about becoming pre-approved.

3. Look for a new home from a production homebuilder. The easiest way to purchase a home with no money down is to buy a new home from a production homebuilder such as you will find in a subdivision or other small or large development. They are typically the only builder for an entire new development or subdivision, and they build on land they own, use standard models usually with a variety of options, build more than 25 homes a year, and generally build for all price points.

4. Check whether the homebuilder has a relationship with a down payment assistance program. Most new production homebuilders are set up to benefit from a program that has no income or asset limits even for new homeowners—even with credit challenges.

5. Offer to accept your new home before it is completely finished. Many homebuilders will allow you to paint the interior or perform some other labor to finish your home. The money you save from doing this can be used as a down payment or help with closing costs.

Tips & Warnings

• You shouldn't expect equity to build quickly using this technique, and you will have little or no equity when you close.

• The economics won't allow you to refinance for about three to five years (or longer), so be sure the deal works for you at the beginning.

• This technique does not work the same in all cities.

• Avoid buying in cities with a negative appreciation percentage.