How to Buy a Home Without Earnest Money
Earnest money is a deposit you make when buying a home. The earnest money is a show of good faith by the buyer, and binds the contract contingent on loan approval. Earnest money is usually 1 percent of the purchase price, or can be as little as $500. If you don't have the funds available when you find the house you want, you may still be able to make a binding offer. You can pre-qualify for the loan, or find available programs to assist you.
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Obtain a pre-qualified conventional loan. For this you will need a steady employment history with the same employer for two or more years. Your credit score must be 620 or higher. The mortgage payment must be 28 percent or less of your monthly gross income. Your income must be high enough to pay the mortgage payment plus debt of an additional 36 percent.You will need to have between 5 percent and 20 percent of the purchase price available when closing the loan, depending on the requirements of the lender.
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Pre-qualify for a Federal Housing Administration loan. You will need to have had steady employment with the same employer for two or more years. Your credit report should be good, with less than two 30-day late payments over the past two years. You must not have filed for bankruptcy in the last two years or have been foreclosed upon within the last three years. The monthly mortgage payment can't be higher than 30 percent of your total monthly income.
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Obtain a U.S. Department of Agriculture rural housing loan if you want to purchase a home in a rural area. These loans require no down payment and have flexible financing requirements. As long as you have steady employment and show a willingness to pay your bills, you may qualify.
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If you are a veteran, obtain a federal U.S. Department of Veterans Affairs loan. Veterans who qualify don't need to pay earnest money or closing costs. If you have the qualifying income and credit history, there is no down payment required.
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Research U.S. Department of Housing and Urban Development programs. HUD has a number of programs to assist people in purchasing homes with no earnest money and no money down. The agency has a Good Neighbor Program open to teachers, firefighters, police officers, and medical staff. Individual states also offer home-buying assistance programs in connection with HUD.
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