I've gone back and forth on if I think my first home purchase was a mistake or a good thing. Only time will tell if my finances wash out, but one thing I did do well was leverage government and city programs to get into my home for almost no money.
You read the title right. I bought my new home for $1,800. Well... technically I bought it for it's selling price and the renovations, but only had to bring $1800 to closing. For others who have bought a home recently or are looking to buy, this is incredibly... incredibly cheap.
Not to mention that ~$1800 is what many people pay for first month's rent and deposit on an apartment that they don't even own.
I know. Even though it was over two years ago, it still feels amazing. For those looking to do the same...here's how I bought a house for $1,800.
Ask Around
Your mortgage broker or real estate agent may mention downpayment assistance programs to you, or they may not, which is why it always makes sense to ask. Or, if you're in the beginning stages of the homebuying process, do a little internet research of your own.
Just get started by opening up your browser, getting a new window, navigating to google and type in {[state you live in] downpayment assistance programs}. Boom.
Exhaust Every Avenue
Veteran? Single Mother? You may qualify for additional grants and funds. Now isn't the time to be shy.
Get Organized
Any program you may qualify for is going to take a lot of paperwork and patience during the application process. After all, nothing comes free. If you want that money, you're going to have to invest the time into getting it. I recommend in this post to get organized with all your documents before you start actively searching for a home, and if you've done this well the whole shebang will go a lot smoother.
You're going to have to pull tax records, employment forms, W-2's, W-9's and (potentially) other weirder demands like letters from former landlords, lovers, and family members.
Often it's the time and paperwork that keeps many (lazy) people from applying for these funds. In my opinion, that is leaving money on the table.
Decide if It's Worth It
Some programs (like mine) require you buy a home in a certain zipcode in order to qualify for the moolah. Like in the case of the assistance I received, I was only eligible if I bought in a neighborhood hit hard by foreclosure. This is a dainty way of saying, "up and coming," which is a daintier way of saying, "rundown."
I had doubts at first. Friends and family have been terrified to come over. But honestly, I've never had a problem and the neighborhood has turned around a lot, as I expected it to when I was out and about doing my due dilligence. My program allowed me $15,000 dollars. That's a lot of money.
Honestly, if someone came up and offered you a check for 15k to live in an up-and-coming neighborhood, what would you say?
Maybe because I'm a more finance minded person, I took the chance. And because the house was setting off my spidey sense that it would offer the greatest opportunity for return on investment. But it's up to you to decide what you need in your home and its location.
Read the Fine Print
Some programs only allow for the money to go toward just the downpayment and not closing costs, some vice versa, and some allow for both. Be sure to read the fine print of your program's terms to understand how much assistance you're getting as well as the expectations and repayment requirements (if any.)
Ideally you'd want your program to allow for funds to be used at closing, as this is where first time buyers incur the most out of pocket expense, and often it's these costs they haven't accounted for in their budget.
My down payment assistance wasn't a grant, but what finance industry folk call a "soft loan." Because it was given to me by the City of Atlanta via a program meant to revitalize "at risk" neighborhoods, they want to ensure money is going toward owner-occupants and not investors looking to make a buck. My "soft loan" is forgiven $3k for every year I'm in the home. By the end of five years I won't owe a penny, but if I sell early, I'll have to pay back the balance of whatever I haven't "worked off."
That 15,000 helped pay for my down payment, most of the closing costs, and a little bit of the principal on the loan. The $1,800 was my own contribution and a $1000 program fee. I would have had to bring double that amount had I not used the down payment assistance.
You Can Ask Mom and Dad
Don't qualify for any programs or don't have any available in your area? You can always hit up Mom and Dad for a tax-deductible gift (Up to $14k per person, so $28k for you and a spouse) to help cover the down payment or closing costs. Because of stricter financing terms post 2008 housing crash, I recommend leveraging the money for closing and moving costs, rather than factoring it into the financing of the home. This also helps ensure you only buy a home you can reasonably afford.
Be Patient
I had to constantly remind myself that I was getting a free 15k whenever my home closing got delayed because of all the paperwork processing on the downpayment assistance program. And when I was taping tissue paper over the windows of my home because it's one of those quaint-by-day-cagey-by-night neighborhoods. I had to grit my teeth. Free Money. Free Money.
But at the end of the day not having to dip too hard into my savings to get "in" my first home was nice.
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