We want to buy our first house. We do not have a down payment. We are thinking about an FHA loan. Would I?

Asked by Aurora, Chicago, IL Sat Apr 18, 2009

be able to buy a foreclosure?

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Kurt Clements, Agent, Schaumburg, IL
Sat Apr 18, 2009
Aurora Home Buyer:

Check out our website - http://www.suburbanrtohomes.com! About 2 years ago we realized all these crazy no money down loans would go by the wayside. Therefore, we started SuburbanRTOHomes. We give you 100% credit of your security deposit and 100% of the rent you pay towards your downpayment! All of our homes are completely rehabbed, and come with brand new stainless steel appliances in the kitchen, and a brand new washer and dryer as well! Check it out!

Kurt Clements
GSF Mortgage
3933 75th St
Aurora, IL 60504

1 vote
Barbara Weis…, Agent, Tenafly, NJ
Sat Apr 18, 2009
Uh oh, here we go again. If you do not have a down payment, why are you buying a home? Be conservative financially at all times. I have to tell you that in 20+ years in residential real estate I have never sold a home to anyone without a down payment. If you listen to Dave Ramsey, he'll tell you to wait until you have at least a 10% down payment.

Here's what you should do and I know this answer isn't making you happy but it is the truth - wherever you're living now, if you can move to a cheaper place do so immediately and save the cost difference every month. Start saving as much as you can immediately and forever. Think of purchases as dead assets - I bet you never were taught that.

A dead asset is an asset that dies the moment you buy it. For example, you must have that flat screen TV? OK, it's worth half the minute you buy it. That's a dying asset. So is furniture, a car, etc. So before you buy anything, remember you're losing money the moment you buy it so do you really need it?

How about your credit debt? What's your credit score? Learn about that. Do NOT pay off and close credit cards - that will actually hurt your credit score but never ever have any more than 50% of what you're allowed charged on any card.

So can you buy a home with nothing down? Honestly, the only way is FHA and they require a small down payment. Should you buy ever with nothing down? No.

Will you lose an opportunity today? No, the market will be soft for a while longer. Slash your expenses and save as much as you can. You'll be surprised what you can accomplish in one year. Owning a home precariously is never a good idea.
1 vote
Voices Member, , Benton County, OR
Sat Apr 18, 2009
Aurora, Why don't you begin reading the information for your area from Hud on $100 down programs or anything else they may have available..Read and look through here.. http://www.tenmanagement.com/listings/state.do?code=IL

All current Fed Gov loans.........http://www.govloans.gov/govloans_en.portal?_nfpb=true&_p…

More resources worth reading and using.....http://www.fhaoutreach.gov/FHASelf/ ...http://portal.hud.gov/portal/page?_pageid=73,1827624&_da… ...

0 votes
Dana Schuster, Agent, Slidell, LA
Sat Apr 18, 2009
Thumbs up from me,Barbara! Great answer!
0 votes
Ginger L, Home Buyer, Chicago, IL
Sat Apr 18, 2009
Yes, there are governmental grants available in Illinois, such as the Downpayment Plus, that CAN be applied to FHA loans, but 1.) you have to be income eligible (up to 80% of median income in Cook County for your family size) and 2.) you have to take a free 3 hour class. With this $4,000 grant, you need a minimum of a $750 downpayment. However, if you don't have an extra $6,000 lying around, you will need closing cost help... and in the city of Chicago, closing costs are much higher than the suburbs (on a 165k house, the closing costs are about $5000, plus the attorney, inspector, and prepaid insurance (another $1500 or so)). So, given that you need closing cost help, foreclosure properties really aren't an option for you because banks have already lost a great deal and are not in a position to help you. And that goes doubly for short sales. But don't give up. I've been finding some pretty good deals out there on the estate sales. Good luck!
0 votes
David Cruick…, , Palatine, IL
Sat Apr 18, 2009
Both these answers are correct. I want to expand on Colin's statement about the condition of the home. There is a program called the FHA 203K Rehabilitation loan (same guidelines as FHA: 3.5% down etc...) that lets you make improvements to the home and allows you to purchase a home that the appraisal may deem as uninhabitable and for that reason lenders will not "fund" a loan for you. The home may be deemed uninhabitable for several reasons. I used this on my own home that I purchased in October 2007 and I have a blog on trulia about using this loan to buy foreclosures. Please click the link below to take you there. I also broker this loan if this is something you may be interested in.
0 votes
Colin Storm, Agent, Falls Church, VA
Sat Apr 18, 2009
You will still need 3.5% down for an FHA loan product. You are able to use an FHA loan to purchase a foreclosure, but you may find that some banks will choose an offer with a conventional loan if given the option. FHA has a greater say in the in the inspection process and will require the home be in a certain condition before approving the loan.
0 votes
Scott Epstein, , Crystal Lake, IL
Sat Apr 18, 2009
Hi Aurora,

Unless you are eligible for a VA loan, I don't know of any zero down payment options currently available. Depending on your income, you could check with the county in which you wish to purchase a home and see if you would be eligible for a grant that you could use as a down payment. FHA requires that you have a down payment of at least 3.5%. Before you start looking at homes you should contact a mortgage lender as they would be able to provide you with more and better information than I could. Good luck.
0 votes
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