Buying a foreclosed home can be a smart idea, because they tend to be priced lower than similar houses on the market. So whether you're looking for a
primary residence--or plan to sell the house at a later date--a foreclosure
may save you money. However, what should you do if you don't have the money
for a down payment? Try one of these options:
Ask your state for help. If you want to purchase the foreclosed home for a
primary residence, you may be able to get help from a state home buying
program. These are generally available to first-time homebuyers only, and
you'll have to meet some specific criteria. In general, your income will
need to be below certain limits, and the price of the home must not be
higher than a certain amount. To find programs like this in your area, ask
your local mortgage lender or state housing authority.
Find a flexible lender. Some lenders offer "no down payment" home loans
specifically designed for folks who have the income to make monthly mortgage
payments, but not enough savings to make a down payment. In some cases, you
may end up borrowing from the equity in the home, and then using that cash
as your down payment. Although you end up with two separate loans--your
mortgage and a Home Equity loan--both have tax advantages because the
interest you pay is tax deductible (in most states).
Borrow a personal loan. Another option is to get the down payment money by
borrowing it through a separate loan, like a personal loan. Most banks and
credit unions offer simple, basic personal loans where you can use the money
for any purpose at all--even a down payment on a house. One word of
caution: The interest on a personal loan tends to be higher than that on a
mortgage, so it makes sense to put any extra money toward paying off your
personal loan before you start adding extra cash to your Home Loan payments.
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Buying a foreclosed home can be a smart idea, because they tend to be priced lower than similar houses on the market. So whether you're looking for a primary residence--or plan to sell the house at a later date--a foreclosure may save you money. However, what should you do if you don't have the money for a down payment? Try one of these options:
Ask your state for help. If you want to purchase the foreclosed home for a primary residence, you may be able to get help from a state home buying program. These are generally available to first-time homebuyers only, and you'll have to meet some specific criteria. In general, your income will need to be below certain limits, and the price of the home must not be higher than a certain amount. To find programs like this in your area, ask your local mortgage lender or state housing authority.
Find a flexible lender. Some lenders offer "no down payment" home loans specifically designed for folks who have the income to make monthly mortgage payments, but not enough savings to make a down payment. In some cases, you may end up borrowing from the equity in the home, and then using that cash as your down payment. Although you end up with two separate loans--your mortgage and a Home Equity loan--both have tax advantages because the interest you pay is tax deductible (in most states).
Borrow a personal loan. Another option is to get the down payment money by borrowing it through a separate loan, like a personal loan. Most banks and credit unions offer simple, basic personal loans where you can use the money for any purpose at all--even a down payment on a house. One word of caution: The interest on a personal loan tends to be higher than that on a mortgage, so it makes sense to put any extra money toward paying off your personal loan before you start adding extra cash to your Home Loan payments.