Honestly, there are a lot of people who purchase homes without money in a savings account. There are many products out there now that don’t require a down payment. Some of these products are grants, and some loan products are just structured for 100-percent financing in rural areas such as Graham and Greenlee counties.
One of these 100-percent financing products is a USDA Guaranteed loan. This means there isn’t a down payment needed and, in my opinion, isn’t a bad idea if you qualify for it when purchasing a home. This was the first type of mortgage I personally had, and it is a great way for first-time homebuyers to get into a home relatively inexpensively.
This USDA Guaranteed Program is different from a USDA Direct loan; however, most grant programs or “down payment assistance programs” I don’t personally recommend. The interest rate and fees on these down payment assistance programs are usually substantially higher than a traditional mortgage.
If a down payment assistance program is the only way you can obtain a home for your family, that is a different scenario (there is a time and place for each product). The internet, and some loan officers, promote these no down payment programs religiously. You need to research them before you agree to use one, as well as have your loan officer give you a comparison between all of the loan products you qualify for.
Now, as for purchasing a home without any savings, and living paycheck-to-paycheck: This is something to very carefully consider. If something were to break in the home that you now own, you are responsible for fixing it. Some things have to be fixed right away, and that could leave you in a bind. Make sure you are living well within your means so that you can save some money each month for what Dave Ramsey calls an emergency fund.
Dave Ramsey defines the initial emergency fund as $1,000 in the bank. That seems like an obtainable amount. However, next he challenges his followers to save between three to six months of monthly income. This allows you the freedom to not have to put every single expense on credit and allows you to live comfortably, without the stress of, “Oh no, the dishwasher is starting to make a funny noise,” etc.
The other thing you need to consider is doing a personal budget to verify you can really make the proposed housing payment on your income. When your loan officer looks at your information, he only sees a small part of your income/asset situation. He doesn’t usually see what your utilities bill costs, what you spend on clothes each month, what your medical expenses are, what your grocery bill is or how much the kid’s new cleats cost, etc. Nobody knows your financial situation like you.
If you have any questions, please let me know.
Alex Giampietro, loan officer NMLS ID 881299, BR NMLS 1273681, AZBK 0907366, can be reached at Sunstreet Mortgage at 928-362-5998.