First time home buyers are often surprised at the amount of money needed to buy a home. It is not just the down payment. The additional costs (called “closing costs”) can add up to anywhere from 2-6% of the home’s purchase price depending on where you live. Some areas have higher taxes or recording fees that drive up the closing costs. Other areas may be in a flood zone or high-risk area which increases the amount of homeowner’s insurance needed to be paid. You may even choose to pay “discount points” to reduce the interest rate on your loan. Luckily, there are options to buy a house with no money down.
Typical Closing Costs
- Home appraisal – determines the market value of the home; protects you and the bank
- Home inspection – check for any repairs need to the home
- Credit report– fee the lender is charged to pull your credit
- Origination fee –paid to the lender to process the application
- Discount points – buys down the interest rate on the loan
- Title Insurance – insurance to protect against someone claiming they own the property
- Recording fees – charged by the county to record the new mortgage; may also include local taxes
- Escrows – money held by the bank to use when paying taxes and insurance
- Homeowner’s insurance – most insurance providers require 1 year paid in advance
The two most common options for assistance are also the most restrictive and are limited to only covering your down payment. Those two options are government back programs from the VA and USDA. As the name suggests, the VA program is offered only to veterans. The major benefit is that VA loans require no down payment. The drawback is that there is a VA funding fee and you still have to pay closing costs. The USDA program is restricted based on where you live. Only certain areas of the country where the government wants to encourage development are eligible. You will need to check the website for updated maps. Like the VA program, you can avoid having to pay a down payment but closing costs are not covered.
The DubbleUpp is an exclusive program that will match you up with an investment partner who will pay your down payment and all closing costs. You are responsible for making the monthly mortgage payment and covering most normal maintenance, but you will split any major maintenance like HVAC or a new roof. Both of you co-own the house and will split any profits when it is sold – generally in 5-6 years. The only requirement is that you have a credit score over 680.
By having all of your savings still in your bank account, you can afford to furnish your new house or make any necessary home improvements right away. You will not fall into the trap of being “house poor” spending everything you have just to get into a new home.
Instead of paying rent and trying to save for a new house, you can own right now. Statistics show that the net worth of someone who owns a home is 40x greater than someone who doesn’t. Use one of the programs mentioned above, start acquiring wealth, and take pride in your new purchase. You deserve it.