How to Buy a House with No Money? Owning a home is cheaper that renting. Here is how!
How Do You Buy Home with Zero Down?
This is Wayne Turner with Turner Real Estate Group Thank you for watching this video clicking on this website podcast wherever it may go and be social media Facebook you get it reason why I wanted to come to you today is talk to you a little bit about USDA. That stands for United States Department of Agriculture, you’re probably thinking What does USDA What does the agricultural department have anything to do with housing and real estate. Well, it has a lot to do with it. Here’s the reason why the United States Department of Agriculture, USDA guarantees home loans.
Yes, USDA guarantees the loan that is given to you, the consumer by a mortgage lender. So for example, it maybe a local bank that gives you the loan, but it’s guaranteed by USDA.
Here are the many benefits of it. The benefit is the interest rates are incredibly low. Right now there are two and a quarter percent. Fixed Rate 30 year amortization unheard. Unbelievable, two and a quarter percent and we’ll go over some numbers here just a minute and some scenarios with prices of houses so stick with me. The other thing that’s really cool about this is that with the USDA loan at 2.25%. You also don’t need any money to purchase the property. That’s right. No money down…you don’t need any money to buy a home. The income limit what they call your maximum gross income limit is $90,300 in our local area here and southern Louisiana around the Gulf Coast, St.Tammany Parish.
Most people find it hard to believe that in St.Tammany Parish Louisiana they can buy a house with no money out of pocket. This is not a joke…no money out of pocket, credit score 640 or higher. There are some exceptions that we’ve seen people with between 620 and 640, be able to purchase a house so it does vary, but 640 and above and you’re in a home. They’re going to verify your employment, your bank statements, they’re going to verify those things of course. But literally, other than that, you buy a house for no money out of pocket. They, will literally allow the seller to pay up to 6% of your closing costs. Now closing cost in our area never exceed three and a half percent, and that covers everything to get you going as far as into the house mortgage up and rolling insurances, taxes and escrows.
We at Turner Real Estate Group have the seller pays your closing cost, we even get you a home warranty thrown in for you. This covers the house for one year so if you buy a house is 20 years old, or 15, years old, and it has the original central heating air, the original appliances, those can be covered under a home warranty. Please, think about that the next time you’re thinking about signing a lease on another apartment, or renting another house because you could purchase these homes.
Now, some people might say wait I’ve had a bankruptcy. If your bankruptcy has been three years out can I buy a house? YES…you can buy a house with a USDA loan if the bankruptcy has been 2 years. Some people say wait I had a foreclosure I had to short sale my house years ago, Three years out, you can get a USDA loan. What they do as far as the income, if you’re single, they look at just that income. If you’re a married couple, they’re going to use both of your incomes. USDA loans are primary for low to moderate income households, first time homebuyers just kind of getting started in your 20s.
What if I’ve purchased a home before, can I get an USDA loan? YES.. you can have owned a home before you can actually own a home currently and still get a USDA loan. If you purchase a home before that’s quite alright you can have purchased 10 homes and still get a USDA loan. USDA is not a first-time homebuyer program. The lender I spoke with a today at Hancock Whitney said they have these loans on their books to give to people. They just need people like you that are watching that want to own a home that want a patio that want a covered back porch that want their own space to crank up the music, they can have a garden in the backyard gatherings. For me personally when I was 21 years old I bought my first house and I wanted that house because I wanted a dog. I wanted a yellow lab.
Regardless of doing research on YouTube, share this information with people because this is a phenomenal program we don’t know how much longer is going to be around. But the good news is it’s here now, and it’s going to be here for at least another year.
Let me recap…You can buy house, no money out of pocket 2.25% interest rate your income can not exceed $90,300. In addition to buying a house with no money down through USDA you also get the benefit of the lowest Mortgage Insurance Premium of .35% annually,
So, When you get a home loan, you purchase a property if you don’t put down 20% on the property, you’ll have to pay what they call mortgage insurance premium. That’s insurance policy in case you default on the loan and covers the lender interest. You have to have mortgage insurance if you don’t put a minimum of 20% down and the reason why is because they figured if you put 20% of your own money down on a $200,000 home. That’s $40,000, you now own a $200,000 home you have $40,000 of your own money, aka skin in the game, your balance is 160, the likelihood of you letting that property go into foreclosure is very slim, because most people that have that much equity wouldn’t allow the home to fall into foreclosure. If they fell on hard times financially they could sell the property and get that money back. That’s why you don’t have to have that PMI.
Now, how do your figure what you pay in mortgage insurance? I’m going teach you real quick You take your purchase price, let’s say, $200,000 and some people say well it’s on the loan amount, it is, but this is a 100% loan, you’re not putting any money down. So, you have a $200,000 purchase price $200,000 loan amount, you multiply that number by .0035,
$200,000 x .0035 = $700 and you divide that by 12 equaling $58 and this is what they add to your monthly mortgage payment..
On a $200,000 loan your principal and interest payments going to be $764 with the 2.25% rate. So if you’d literally purchase a house for $200,000. No money down your principal and interest is $764. If you’re like me and you’re like, what else is that sounds too good to be true, well you have taxes and you have property taxes and insurance and then you have that mortgage insurance. The mortgage insurance premium runs you 58 bucks a month that’s 200,000 times the point .0035 give you $58 a month, and then you’re going to have Taxes and home owners insurance. A good rule of thumb is 1% to 1.1%, which would typically cover taxes on the property and 1.1% for insurance so if you have a $200,000 house, you can factor on about $2,000 a year in taxes and the same for insurance now you can simply take those annual amounts and divide by 12, you’re going to come up with around $167 for each of those. And then you add that to the $58. Take the $58 for the mortgage insurance, the $167 for taxes, the $167 for your homeowners insurance, and then your principal and interest payment of $764 that literally leaves you with $1,156.
Why sign a lease when you can own a home for no money out of pocket? Think about that? Why would you go sign a lease, when you can buy a property? No money out of pocket 640 or higher credit score and you can buy literally no money out of pocket 2.25% right fixed your payment won’t change, and you’ll thank me in 10 years when you have equity in that property or five years whenever you want to go to sell it.
I tell people when you’re young, don’t get to move happy, and others may sound crazy coming from real estate agent but when you buy your first house, just kind of sit for a while, stay in that thing five to seven years. And then when you’re ready you’ll be amazed at how much you have pay down on your principal balance. When you have such a low interest rate, it’s quite phenomenal. If you have any questions or concerns you can contact me, we have a list of lenders that can help you. I’m also going to put some links in here to properties so you can click and see every property that’s available for sale in the USDA loan program. And that loan limit basically, in other words, if you made $90,300 a year divide that by 12, they’re going to basically loan you that 31% of that number. I’m Wayne Turner Thanks for watching. Thanks for reading thanks for listening. Let us know how we can help. You can always look us up on the web, www.Wayne turner.com, or just Google my name, and my company Turner Real Estate Group, hope you’re having a good day, we’ll see you soon.
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