Buying a house on installment terms or through mortgage always poses a problem of coming up with a down payment. To ease the burden of down payment some sellers offer what could be termed as split-down payment or staggered-down payment over short period of time. They offer this scheme especially if the buyer has expected source of funds that should cover the down payment within a short period. The problem of down payment arises when a buyer can afford the monthly mortgage but has no way to raise the buyer's equity required by the mortgage company. There are some ways to go around the equity required and here are three of them:
1. The Seller's selling price is way below current market value or appraised market value. Mortgage or financing companies usually give out home loans 100% of market or assessed value. If the seller's price is say 80% of the 100% loan amount, then you have 20% available as equity. The seller must agree that the loan amount is the selling price and acknowledges receipt of the buyer's equity. In that way, there is practically no money down coming from you. It would look like you've bargained your way out of the down payment! Find out also the possibility of making the 20% as a discount given by the seller to do away with down payment. That would be more transparent in the eyes of the mortgage company.
2. Rent-to-Own purchase is becoming a popular way to buy a house with no money down. This one is quite tricky and reading the lease-purchase contract very well is a must. Understand the clauses very well under terms and conditions. A minimal option fee 5% or less is frequently required to secure the lease-purchase agreement. The right to exercise the option to purchase is usually short, about 3 years max. Not exercising the option will nullify the lease-purchase option contract. The buyer loses the option fee and rent paid which normally forms part of the equity. See if it is possible to keep the property price as is, until the time you exercise your option to purchase. This will save a lot of money while your lease payments are also like savings on the down payment.
3. In-House or owner financing is another to look at when buying a house with no money down. In-house financing is usually done by owner-developer-marketer of real estate. This means they own the land, developed it and are marketing it on their own, offering installment purchase in-house. Many of the owner/developer/marketer outfits are flexible in terms of sale especially with no money down. There are those who incorporate the down payment in the first few months or years of mortgage payment, depending on the capacity of the buyer. After the down payment has been satisfied after the months or years as stipulated, the monthly mortgage payment returns to regular. In its truest sense, there was a down payment on the purchase. What the scheme here offers is relief from the problem of coming up with outright cash for down payment.
There are some other ways for no money down in house purchase. A few would really not require down payment but has to be negotiated in some way or another. Others yet are actually offering deferred or staggered down payment that will not require outright cash down payment. Those that allow second mortgage could be for down payment. A buyer should take a good look on this because mortgage payments could be beyond their capacity.
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