Home Buying in Dallas>Question Details

Mathew George, Home Buyer in Dallas, TX

I see ads for zero move in offers ? Sounds too good to be true ! What are the cons about it ?

Asked by Mathew George, Dallas, TX Sun Jun 8, 2008

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Hi Dr. Mathew,

The ads for zero move-in are usually from investors who already own the home and are trying to get someone in it. They've bought the home, have no one in it usually, and are trying to get it sold, so they use that tactic as advertising to get someone in their home. It gets them out from under the payment that they may need out from under for a variety of reasons. Sometimes builders run specials like this too for a variety of reasons to stimulate interest.

Loans with FHA require you have some "skin in the game" and will allow you to get back at closing any monies you have put down on the home except for $500. There are also some down payment assistance programs that you can get in conjunction, if you qualify, with an FHA loan that will pay for the mandatory 3% down payment with FHA.

Now, if you needed to turn around and sell the place in a year and you put nothing down, that could be a downer. But, in your situation, being a Dr., it's unlikely that you're going to get transferred or anything like that. You will probably pick an area to practice in I would guess and stay there to build your practice and likewise stay in the home until it no longer suits your needs/lifestyle.

Another con is that if you have a loan for 80/20 or 80/15/5 or some combination thereof, you will have PMI - private mortgage insurance. PMI is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home's value. In other words, buyers with less than a 20 percent down payment are normally required to pay PMI. Your loan officer will give you a good faith estimate and let you know what your PMI cost would be on a monthly basis. If you plan on staying in one place for a long time (10+ years), you may pay down your PMI to a point that you won't have it anymore. You just multiply your purchase price of the home you are considering x 1.25 and it will give you the minimum value of your property required to cancel PMI (for example $250,000 x 1.25 = $312,500.) Looking at the interest rates today on borrowing for a new home vs. interest rates on what you can get for your investment dollar - it makes more sense to take on the PMI. The vast majority of 1st time homebuyers do not put 20% down these days.

Hope this helps,
Terri Hayley
2 votes Thank Flag Link Sun Jun 8, 2008
I have to agree that you probably need pretty good credit. Also, a lot of the lenders roll in closing costs into the price of the home.
There are also a lot of programs from the government to help out. Just find a good lender to help you find them if you qualify.
Good luck,
Jeff
1 vote Thank Flag Link Mon Jun 9, 2008
It simply means you will be rolling your closing costs and down payment into your note. It can be very advantageous if you plan on living in the home long enough to recoup those costs with appreciation. However it can sting you if you plan to move within a couple of years or more. Also it makes it very difficult for you to sell your home if you are purchasing in a newer neighborhood where the builder is still building. Scenario: If you roll your closing costs and down payment on a $100,000 dollar home you know have financed somewhere around $108,000 thousand for a home that is only currently worth $100k. So if you have to sell that home in a year or two, it most likely is still only worth 100k but you need to net $114,480 because you need to get the amount you rolled in plus the realtors commission.
1 vote Thank Flag Link Sun Jun 8, 2008
Mathew,

Actually, zero move in is the best approach to buying a home especially if you are a first time buyer. With mortgage rates as low as they are, it does not make economic sense to put any money down on a house...unless absolutely required by the lender...because the effect on your monthly payment is minor. For example...with rates in the 6% range, each $1,000 of down payment will only reduce your monthly payment by about $7.00...that's it. It is better to keep you cash.

Again, some mortgage programs like FHA require a 2.25% net investment in the property. But a seller can contribute up to 6% of the sales price towards the Buyer closing costs...reducing the Buyers cash requirements.

There are buyer assistance programs that can provide for the down payment and this together with a Seller contribution...if structured correctly - and this is where an experienced Realtor is important...you can basically walk through the door with zero cash out of pocket.

The con is that you're actually using your equity position in the property to cover these costs and you would not be able to sell the property for a couple of years without being in the negative. But if you are planning on staying with the home for a while, I highly recommend this strategy. It is one that I work towards with all of my Buyer clients.

Please feel free to call or email if I can help you in any way.

Alan Wynn - Realtor
Like NO ONE Else!
214.729.5582
info@DallasHousesOnTheWeb.com
1 vote Thank Flag Link Sun Jun 8, 2008
If you are serious about buying you need to get in contact with a good Lender. I know FHA has a program where you can roll in your down payment and ask for 6% seller contribution. But you need to speak with a lender to get all of the details and to see if you are qualified for this program. Also keep in mind there are other fees that are associated with buying a home such as earnest money, option money, inspections, survey, appraisal and closing cost. Some of these things can be negotiated out in a contract, and others will need to paid upon delivery of service. If you would like a list of lenders just let me know.
0 votes Thank Flag Link Mon Jun 16, 2008
We probably just need to find out more about the offer. I'd be surprised if you can get a really legitimate deal for ZERO move in these days. My concern would be who has the title to the property and who do you make the payments to? The con can be X holds the title, Y has contracted with X to sell the house to a new buyer. You make the payments to X or Y and they never send them to the lender. The lender forecloses and you get kicked out of the house and cannot find X or Y or your money. In any of these cases I'd think YOU as the buyer want your name on the title to the house and you make the payments directly to the lender on the deed of trust. You can help minimize your risk if you use a realtor or attorney to help with the transaction and close it at a title company. I ran into a deal recently where there is a FSBO sign in front of the house. Seller tells buyer give me $5000 and take over my payments. Seller even lets the Buyer move in right away with no rent payment. BUYER thinks it is a really good deal and says ok I'll meet you at title company. Seller says no reason to get title company involved and go to unneccesary expenses. Buyer insists and goes to title co first to check title and status. House was in foreclosure process and set for auction in a week or two. Had buyer given the seller $5000 in cash that money would be gone, gone, gone. When it sounds too good to be true, it normally is not a good deal. Possible, but not likely.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Tue Jun 10, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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You also have to remember that most of these programs, the buyers have to have pretty good credit. So many lending practices changed in the last year or so and, for MY area at least, most of the "problem" credit programs are a thing of the past. Just be careful and READ the way the loan is structured. WHEN IN DOUBT, get an attorney to look it over.
Good Luck!
0 votes Thank Flag Link Sun Jun 8, 2008
Are you talking about leasing? Or are you talking about Dallas homes for sale? Bottom line it all depends on how the contract is structured and negotiated on your behalf. Contact my office if we can assist. 972-699-9111

http://www.lynn911.com
0 votes Thank Flag Link Sun Jun 8, 2008
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