So if you’ve been thinking about buying a house (condo, townhouse, duplex, etc.) but weren’t planning on putting any money down, the time to do that would be now. As in right now. Why? Because, according to the provisions of the “Housing Rescue Act”, no-down-payment loans will be disappearing. Actually, these types of loans have been gone for some time now, but there was a loophole.
Up until now, there have been a handful of loan programs in which a 3% down payment is required, but the seller has been allowed to make that down payment on behalf of the buyer. In other words, the seller credits that 3% of the sales price back to the buyer at closing, and means they need to borrow 3% less than the sales price, so that’s considered the down payment.
A lot of mortgage “hucksters” have been advertising recently that this is the last opportunity for buyers to take advantage of “free money.” But that’s a bit of a stretch. There is no such thing as “free money” in the real estate world. If a seller knows he is crediting 3% back to the buyer, he’s going to add that 3% to the lowest price he will accept for the house. Which essentially means that the seller tacks an extra 3% onto the price, and them gives it back to the buyer.
Of course, tacking 3% on to the price of the house doesn’t work so well if the price was already close to top dollar. I’ve had listings where buyers offered 3% more than asking price, in exchange for the down payment assistance. But we couldn’t do it because they property wouldn’t appraise for the additional 3%.
Nevertheless, these programs helped a lot of first time homebuyers. And as of October of this year, they are going away. Buyers will be required to bring their own money, not the sellers’, to the table for a down payment. And the FHA minimum down payment will increase from 3% to 3.5%.
So if you’ve been thinking of buying but don’t have the cash on hand to make a down payment, you will want to move ahead now. As in immediately. Obviously, you shouldn’t buy if you’re not financially prepared. But if you’re confident you can handle the payments and you want to buy with no money down, you’ll have to find and close your new home by the end of September.
That’s not a lot of time. But given the large inventory of houses, condos and townhomes on the market, and given how many of those are foreclosed or for some other reason vacant, closing a property by the end of September would be quire do-able.
And there are some danged good deals out there!!