A key element of the American Dream has been for families to own their own homes. For many families this is their primary goal. Home ownership is a practical financial investment that offers many rewards and advantages, yet for many families the dream continues to remain out of reach. However, if you have the ability to repay a home loan, but lack the required down payment, there are ways, which may allow you to buy a house more affordably.
Fixer-Uppers
Shop around for a fixer-upper, especially if you are a talented do-it-yourselfer. This may be your ticket to buying a bigger, more upscale home later on. Often a fixer-upper is an older home that has been neglected in recent years. By buying a lower priced house that your budget can afford, you can make repairs and do a basic remodel yourself which will add value to the home. You can eventually resell the house for more than you paid, and earn a profit for a down payment on a better home. Look for a home that does not require a major overhaul, which could translate into a considerable investment to make improvements. The need to replace electrical, plumbing, sewer, or heating system would be costly upgrades that might not be as easily visible to potential homebuyers in the future. Look for a house located in a desirable neighborhood or in an area that is growing.
Foreclosure Properties
Land a bargain by buying a foreclosure property. While you can realistically expect to purchase a property for five percent below market value, you might possibly save up to as much as 40 percent when you buy a foreclosure. Either way, depending on the price of the home, you can still save thousands of dollars. There are some good buys out there, so if you are in the market to buy a house, take the time to search public records for notices of foreclosure. Bank-owned properties are less risky. Many times a lender will finance the property for a lower interest rate, not require as much of a down payment or forego charging the buyer certain closing costs.
Rent-to-Own Option
Think about the option of renting to own. This allows you to rent the home for a specified period of time with the agreement that the seller will hold the property for you. At the end of the period predetermined at the signing of the lease, the owner of the home then gives you the option to buy. The sale price for the house and amount of rent to be paid each month are negotiated before signing a contract. A portion of the rent you pay each month is usually credited toward a down payment when the time comes to finance a home mortgage.
Cohabitate to Save Money
Live with family for a while so that you can save for a down payment on a house. You can come out ahead, especially if both spouses work. Without having to pay a monthly mortgage or rent, you may be able to save enough money within just a year or two to pay off some debts and have enough left over for a reasonable down payment on a house of your own. Discuss how much you will pay each month for room and board before moving in. Everyone should know up front what is expected as far as financial contributions toward utilities, food and other household expenses.
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