Are you ready to buy your first property? It can seem like wishful thinking, but it’s not as difficult as you might imagine. This year you can buy your first property with less thank 2k! You don’t need to have perfect credit, and you don’t need to have a ton of cash saved. If you have verifiable income, at least $1,750, and a 640 score, you can make ownership a reality.
Income and credit scores have more of an impact on your approval than what you have in savings. Some lenders will get you approved with a lower score, but then you won’t have access to the down payment programs that help cover closing costs.
What’s the $1750 for?
Lenders require the past two tax returns, check stubs, and identification. With these items, you’re able to get pre-approved, and you can start searching for properties. When you find a home and put in an offer, the initial cost you will pay out of pocket will be $1,000 earnest money. This shows the sellers that you’re serious, and it will count towards your closing costs.
After you sign the contract and send in the earnest money, the next fee you’ll pay is $300 for the home inspection. Lenders do not require inspections, but it’s in the buyer’s best interest to have it done. Inspectors will check for any problems, big or small so that buyers can make informed decisions. The seller can resolve issues, or the parties can negotiate a lower selling price. The contract is then updated, and items must be resolved before closing.
There are a few options to pay for any final expenses at the closing table. Every state has grants available to cover these fees and especially for first time home buyers. This is where your credit score comes in handy. Fair credit, at 640+, will qualify you for a grant, and many offer up to $7,500! For you to leave the table without owing any additional funds, this would need to cover 2%-5% of the total loan amount plus a minimum down payment, which is 3%-3.5%. Your buying power will be limited but this is the way to go if your low on cash.
After the inspection, the final fee to be paid to buy your first property is for the appraisal. The cost to get your home appraised is usually $450. Lenders require appraisals to determine property value. If the property is valued at more than the asking price, the buyer walks in with instant equity. Then when it’s time to sell your home, you’ll make a profit. If the home is worth less than the asking price, the seller will lower the cost.
How will I cover cash-to-close?
There are things to consider before taking advantage of these programs. Some have specific requirements that you need to adhere to in order to sign up. Many grants require the home to be your primary residence, which means you must live there. Additionally, grants may obligate you to stay in the house for a certain period before you’re able to sell the property. Deviating from these could result in you having to repay the grant in full. You will need to review the guidelines carefully before your decision.
There are many incentives available to first time home buyers and you’ll probably end up leaving the closing with a refund (Woo-hoo!). Any of the grant funds that weren’t needed to close will be given to you on the spot. So, not only did you buy your first home with less than $2k, now you have extra spending money.
You’ve got this!
There are several ways to get around not having a lot of cash to buy. Consider buying a multi-unit property. For example, if you purchase a 2 flat, the rent monies that will be collected every month will add to your income and increase your buying power. If you take this route, all you need to do is find a reliable tenant. Depending on where you live, you may be able to find a home with current residents.
Stop holding yourself back from your dreams of home ownership. These tips will have you well on your way to buying your first property. Yes, it is doable, and it doesn’t have to break the bank. Good Luck!