Alabama
No Money Down Loans
In this difficult Alabama
economy where stock valuations are questionable, one of the best
Alabama investments is real estate. But for many potential buyers,
the problem is coming up with a down payment to make this all-important
purchase. This should not be the case. It is possible to buy a home
with nothing down, meaning no down payment. There are several methods
by which eligible home buyers can minimize or even eliminate down
payments. They include: VA loans, Owner financing, Lease/purchase,
House trading, Job-related federal programs, and State and local
government programs.
Alabama
VA Loans - The method of purchasing a home with no down
payment that most people are familiar with is through the Department
of Veterans Affairs, or VA. This benefit is available to active
and retired members of the military service, veterans, POW's and
MIA's and their unmarried widows. All branches of the service including
the Coast Guard are eligible. Also members of Selected Reserves
or National Guard who have completed six years may be eligible along
with many with WW II service from the merchant marines, military
academies and others pulled into service for the war effort. Many
older veterans may recall a time when they were entitled to use
this benefit only once in their lifetime. This was changed in 1989.
Now, the only existing stipulation is that an eligible person may
use this benefit on only one house at a time. As with all VA loans,
the house must be used as a primary residence. It may not be a rental
home or second/vacation home. There is no maximum home loan amount.
Nothing-down VA foreclosures available to everyone What many people
do not know is that you do not have to be a veteran to purchase
a VA foreclosure with nothing down. VA foreclosures are available
to the general public. Some require nothing down or just a fee of
$500. Although the homes are sold from the VA, purchasers must obtain
conventional or FHA loans unless they are veterans or active military.
VA foreclosures with nothing down or $500 fees can be found among
those from banks, lending institutions and federal agencies.
Alabama
Owner Financing, Lease-Purchase
- If a glut of unsold homes develops in a market, some sellers
-- especially those in a hurry -- become willing to assist the buyer.
There may be additional pressure on sellers of used homes when they
compete with builders in their areas who fund down payments on new
homes. These sellers may agree to lease-purchase or owner-financing
plans. In both cases, purchasers do not pay down payments to acquire
the properties. Although they allow a home buyer to purchase a home
with no money down, these programs can be good and bad for the purchaser
and should be approached with caution. As with any legal transaction,
you should use a standard legal form. Lease-purchase forms are obtainable
at most major office supply stores. Owner financing contracts are
not readily available and will have to be drafted by an attorney.
In the case of lease/purchase agreements, the seller agrees to a
price that he will sell the house for at some future date and the
buyer usually pays a monthly amount several hundred dollars more
than what the home would receive as a rental. Depending on how the
agreement is written, this additional money can be a "down payment"
savings plan. A portion of the additional money can be returned
to the buyer when the house is sold and used as a down payment.
If the buyer decides not to buy the house, all additional moneys
are forfeited. If the buyer decides to complete the transaction,
he or she would secure a mortgage from a lender. These arrangements
are similar to those in owner financing except in that case the
seller is the lender. There are two areas of concern for the buyer
with these types of purchasing options. In both cases, because the
buyer is not paying a mortgage company he does not receive any of
the tax deductions for the interest on the house payments. This
may be an acceptable trade-off for the ability to purchase a home
without a down payment. The second area of concern requires more
judgment. Because the buyer is paying the seller each month instead
of a mortgage company, if the seller were to go bankrupt or lose
the home in foreclosure, the buyer's entire investment might be
lost. But on the flip side, there have been several occasions where
persons have entered into lease-purchase agreements and then found
purchasers for the homes at amounts much greater than the selling
prices contractually agreed upon. The lessees bought the houses
from the sellers and then resold the houses for a large profit in
the same day.
Alabama
House Trading, Lines of
Credit - Many professional investors acquire homes with
no money down by trading one property for another. In some cases,
they trade one large property for several smaller rental properties.
Or they trade houses in different cities to acquire a vacation or
retirement home. Property trading is also a legal way to avoid the
capital gains associated with selling a property. Another way to
acquire a property with no money down may be with a line of credit
secured by the equity in another property. This allows the homeowner
to purchase another property using the accumulated equity in a home
without selling the original property.
Alabama
HUD - The Office
of Housing and Urban Development (HUD) offers special financing
for first-time home buyers. This program is based upon need and
is designed to allow low-income families to obtain their first home
without a significant down payment or closing fees. Also, many HUD
foreclosure homes require no down payments.
Alabama
Job-Related Federal Programs
- The federal government also has programs to help farmers
and police personnel acquire homes with nothing down. For those
with limited income who wish to live in rural areas, the Rural Economic
and Community Development Administration offers farmers home loans
with nothing down. Monthly payments may be subsidized and the interest
can be as low as 1 percent. To encourage police to occupy homes
in crime-targeted areas, special federal programs permit police
officers to purchase homes in selected areas with nothing down.
Information is available to law enforcement officers through their
places of employment.
Alabama
Local Programs -
Some states like Alabama, have counties and cities that offer
programs that can eliminate down payments. Often, prospective home
buyers must meet income requirements, hold certain jobs, be a first-time
buyer or agree to buy in a specific area. It can take some sleuthing
to find such programs. Start with your state's housing agency. Your
county or city also may have a housing agency. With so many methods
available to obtain homes with little or no down payment, the goal
of homeownership should be achievable by almost everyone who desires
it.
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