Cash Strapped? Down Payment Obstacles Can Be Overcome With Some Creativity!

You have the monthly income and you have good credit.  Now there's only one thing standing in the way of you purchasing your first home- the cash.

If you have relatives who'll give you the cash you need, great.  (U.S. tax law currently permits an individual to give a gift of up to $10,000 per year to someone without triggering the gift tax).  Studies show approximately 15% of first-time buyers receive financial assistance from a relative.

If you aren't likely to receive a gift or an inheritance when you're ready to buy, there are a few other options you can consider:

SELLER FINANCING

If you can qualify for an 80 or 90 percent mortgage, but are missing some of the down payment, consider asking the seller to take back a second mortgage for the amount you need.  If you have 15 percent of the purchase price (plus some cash for closing costs), you might ask the seller to take back another 5 percent so you can qualify for an 80 percent loan-to-value mortgage and avoid Private Mortgage Insurance.

MORTGAGES

Consult with your lender to see what the limitations will be for that second loan. You might also ask the seller to take back the entire mortgage (if he or she doesn't need the cash for another purchase) which may be easier and cheaper than using a conventional lender.

LEASE WITH AN OPTION TO BUY

If you find a house you like, ask the seller if you can rent with an option to buy. Typically, the seller will take a portion of the monthly rent check and credit it toward the down payment.  How much is the credit?  Anywhere from zero to 100 percent (but 33 to 50 percent is typical).  You may have to put up a non-refundable option fee but the amount of the fee is negotiable.  You should consult with an attorney to protect your interests.

ZERO DOWN PAYMENT LOANS

Bruce Webb, Associate Broker, Coldwell Banker Preferred

bruce@brucewebb.com

www.brucewebb.com

(734) 392-6021