How to Buy a House With NO Down Payment!

For the home buyer in today's market it can be difficult.negotiate a loan with little or no down payment, based
The fear of a declining economy has causedon the loan to value ratio. The loan to value ratio or
everyone to tighten their belts. Banks are making itLTV is something lenders want to see before making
harder to borrow money, employers are not hiring orany loans. Basically the LTV is the market value of the
not allowing overtime, the cost of everyday needs ishouse divided by the loan amount.
going up. People are not able to save large amountsSo, in our 100,000 dollar example with a normal 20%
of cash with all these factors stacked against them.down payment the lender would be making an 80%
So what does a home buyer do when they need toloan. If the market value of the house is 100,000 dollars
come up with a down payment? Usually the bank orand the loan is 80,000 dollars the LTV is 80% (80,000
other lender requires at least 10% often 20% of the100,000 = 0.8 x 100 = 80%). Now since the buyer has
purchase price as a down payment. So on a 100,000been making payments for say 2 years, the price of
dollar purchase you, the buyer, need to show up withthe house has been reduced by some portion of the
10,000 or as much as 20,000 dollars. What if you don'tpayments, perhaps 50% (or more, this is negotiable, but
have it? This is definitely something you need to thinkthe math is easier at 50%). So if the buyer has been
about before you even go out to look at a house tomaking 1000 dollar a month payments (this may be a
buy.little high but again, the math is easier), 500 dollars a
One possible solution is to negotiate a lease-option tomonth is taken off the purchase price, so 500 x 24
purchase. This may have different names in differentmonths = 12,000 dollars. The original 100,000 dollar price
areas but the idea is the same. You the buyer and thehas been paid down to 88,000 dollars. After 3 years,
seller agree that you will lease the house from the100,000 - 18,000 = 82,000 dollars which is now very
seller for some defined amount of time like 2 or 3close to the 80% LTV, so the lender could loan 80,000
years. The lease payment amount being equal to ordollars for the 100,000 dollar house and the buyer just
somewhat more than you would be making inneeds 2,000 dollars as a down payment. It is possible
mortgage payments. At the end of that time you havethat the lender would consider the payment history
the option to purchase the house at a predeterminedand not make the buyer have a 2,000 dollar down
price, with some of your lease payments applied topayment, it never hurts to ask.
the purchase. If not, you can move out or with theAll of these monthly payment numbers and
seller's consent stay for another year or other termpercentages are negotiable between the buyer and
you agree on.the seller and need to be agreed upon in advance. All
This works for a seller who doesn't have anof this needs to be written in a contract that everyone
immediate need to cash out of the house. Either it isunderstands and agrees to before any money
paid off or he can easily make the mortgagechanges hands, to prevent disagreements later.
payments from the lease payments the buyer makesOkay, so the lease-option is something to be
to him. This method allows the buyer to work onconsidered when shopping for a house and the buyer
purchasing the house without the need for a largeis short on down payment money. Just remember to
cash down payment.negotiate everything in advance and get it ALL IN
At the end of the 2 or 3 years, the buyer can go to aWRITING!
lender with a history of on-time payments and