What a detailed answer. I was so close to giving you a TD because of "come close to doing both" and promoting what has largely become a scam. Yet as my own attention wained, I realized that this detailed answer may actually help a consumer realize the it isn't a get rich quick possibility or a free ride. It is very difficult and confusing. And by the time they get to the end, they've already given up on the idea.
I know, I'm one to talk.
The no down payment is easiest, even in today's market. FHA program and individual city/state program can effectively eliminate the down payment.
There are other purchasing techniques that will also eliminate or sharply reduce any downpayment. For example, using a lease-purchase or lease-option structure, you may be able to reduce your up-front cost to a minimal option fee. Or even no upfront option fee; the "consideration" is the value of the lease portion of the lease-option. I've done that: lease-optioned a $253,000 property for no upfront cash--just the value of a one-year lease at $1,500 a month.
You can also purchase a property "subject to" the existing mortgage. The current owner gives you the deed in return for your promise to make the mortgage payments. Sometimes, however, there are back payments due, or the owner will ask for some cash for moving expenses or other uses. Even then, though, you may be acquiring a property for 1%-2% in payments to the lender or to the owner, versus 5%, 10%, or more if you were applying for a new mortgage.
In any variation of seller financing, the downpayment, if any, is negotiable between you and the owner. They'll usually want some sort of downpayment, which is completely understandable. But it's negotiable. And I can envision circumstances in which the amount you offer--above current fair market value--perhaps coupled with a relatively short balloon payment--would eliminate the need for a downpayment.
OK, so there are a whole lot of ways to eliminate the downpayment. There are other techniques, too, in which a downpayment would be required, but not from you. Going into it with a partner, in an equity share arrangement, would be one.
Now, let's move on to buying a home with no mortgage payment. That's tougher though, as Bill Clinton said, "It depends on what the definition of 'is' is." In this case, it depends on what the definition of "mortgage" is.
Deborah was close when she said that the only way not to have a mortgage payment was to pay in cash. Actually, the only way not to have a mortgage payment is not to have a mortgage. And therein lies the difference.
Returning to the lease-option scenario, you will have a monthly payment, but the payment will be comparable to rent, not to a mortgage. (Hence, my comment about it depending on what your definition of mortgage is.) The owner of the property still has a mortgage; you don't. So, for instance, in the Northern Virginia area a house worth $500,000 might rent for $1,600. A new mortgage might cost $3,000 a month, plus taxes and insurance. But if the current owner bought the house 20 years ago for $150,000 and his total monthly payments are $1,300 including taxes and insurance, you'd probably be able to lease-option it for $1,600-$1,900 a month. You haven't gotten a new mortgage; the owner hasn't gotten a new mortgage, and your payments are, say, $1,800 a month versus $3,000.
Another no-mortgage scenario: seller-financing. In this case, technically there would be a new mortgage, but one created by the seller. And, depending on negotiations, as with the no down payment scenario above, it might be pegged at well below what a new mortgage would cost. A wrap mortgage would work the same way.
Another scenario in which you wouldn't be paying for the mortgage; a properly (for you and this scenario) equity share arrangement. Now, usually, an equity share is constructed so that an investor puts up the downpayment and is a co-borrower; the resident usually pays the monthly mortgage. But there's no reason why this must the only model. You want no mortgage? Fine. Have the investor put up the down payment and be responsible for 50% of the new mortgage. Your responsibility would be the remaining 50% of the mortgage, plus maintenance of the property. In return, at the conclusion of the equity share arrangement, the investor would be entitled to a greater share of the profits.
Or the same scenario could be accomplished through variations on land trusts. You find someone who wants to sell, but doesn't need their equity out immediately. You find an investor to supply some initial capital for the contingency fund. The investor also agrees to pay part (or most) of the monthly payment to the trust. You pay the remainder. At the conclusion of the trust, the property is brought out of the trust and disposed of according to the trust documents. Typically, the resident beneficiary would have first right to purchase at fair market value; the investor beneficiary would be second in line. But it could be structured in any way you wish.
So, there. We've figured out a number of ways to eliminate any down payment. And we've identified a number of ways to eliminate or minimize a mortgage payment. And these two techniques can work together to accomplish your goals.
It appears I misunderstood your original question. FHA is the way to go provided your purchase is below the current maximum allowed. Please see my link below to check out the counties that interest you. I'm including a list of down payment assistance programs.
Alton Homeownership Program (HOP)
$5,000 (618) 463-3801
Cook County Homebuyers Program (HBP)
$5,000 (312) 603-1062
Dekalb First-Home Program
$2,800 (815) 748-2060
East St. Louis CDBG Operations Corporation HOME Investment Partnership Program (HIPP)
$6,500 (618) 482-6635
Madison County Homebuyer Program (HBP)
$3,000 (618) 692-8940
Springfield Home Ownership Assistance (HOA)
$25,000 (217) 789-2408
St Clair County Homebuyer Assistance Program (HAP)
$4,000 (618) 277-6790
You can post a question to your own question or simply provide more detail. For example, you might want to clarify if you were referring to buying a foreclosure or a tax lien or just that you heard some late night infomercial and was wondering if plopping down money to them was worth learning the secrets.
I responded to your original post which is a different question than this one. It is POSSIBLE that you MIGHT be able to purchase a home with no downpayment, if you can afford the home and meet other criteria. You would need to be working with an agent to find a home (not in foreclosure) where the seller is willing to contribute to closing costs. You will need to be working with a REPUTABLE lender who knows of programs available for no money down. And you MAY need to be working with a government agency that provides "grants" for downpayment assistance for first time home buyers.
This is from Governor Blagojevich's press release in 2005:
Cash Grants for Down payment and Closing Costs
Households with a steady income who can afford a monthly mortgage payment but are unable to
meet down payment and closing costs requirements may be eligible for cash grants of $1000 or
$1500 with an I-Loan Mortgage. In participating communities, IHDA offers an I-Loan Mortgage
that provides 4.25% of the homeâ€™s purchase price as a cash grant to be used for down payment
and loan origination costs. In participating communities, these cash grants can be as high as
To obtain an I-Loan Mortgage, an I-Loan Certificate or any of the other homeownership
programs offered by the State of Illinois, the first step is to find a local IHDA-approved lender.
A list of approved lenders and area income and purchase price limits is available at
http://www.IHDA.org. Illinois homebuyers without Internet access and lenders interested in becoming
an IHDA-approved lender may call 1.877.ILOAN56.
From what I could tell, the above program is not available for Gurnee but is available for parts of Park City, Round Lake, Waukegan and North Chicago.
Good luck, I hope you are able to buy a home.
Please see my blog on this subject for more information.
Hi again Kevin,
If you are asking about tax sale certificates, those can be lower in total cost. Many investors buy these to earn interest income. Rarely do they actually take title to the property for the sale amount of the tax sale certificate.
If you don't make a downpayment, and you have no mortgage payment, how do yo pay for the property? I suspect you mean either/or??
Can you buy a home with no downpayment? Is this question related to your question on foreclosures? Buying a house pre-foreclosure is much like buying any other property, unless there is insufficient equity to reach a traditional closing. If you try to buy a property at a foreclosue auction, you wll need to follow the rules of the municipality/county where the auction takes place. In general, yes, you need at least 20% down, and balance in 30 days. That is a general typical comment, and you need to check in your area to see if it might be different there. If you buy pre-foreclosure, meaning the owner has not yet lost title, you need to make a down payment andmortgage the same as you do with any purchase. There are options for some properties to purchase with minimal down payment.
The only way to not have a mortgage payment is to pay the amount of the purchase price in cash.