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Let me politely disagree with those of you who are saying that, if you can't afford a down payment, you shouldn't be buying a house. There are programs . . . .
Are there a few that may qualify for some social programs such as Habitat for Humanity and others? Yes.
But the vast majority that don't have any money should not jump in and buy a home that they cannot afford. As mentioned above - all sorts of extra funds are needed such as a new furnace, new roof, and on and on.
In one development of a relative some homes are on the 3rd foreclosure since 2008.
Let me politely disagree with those of you who are saying that, if you can't afford a down payment, you shouldn't be buying a house. There are programs already mentioned where your loan can be 100% funded.
The issue is budgeting and living below your means to save money and put a down payment on a house. Those same skills will be needed to save money to fix things in the house when they fail.
If your spending your entire paycheck and you cant figure out how to budget and live below your means, those same people will spend every penny even if their housing expenses drop.
So no, I dont think they should buy a house. They lack the skills to be owners.
TIP: Cancel your iphone, starbucks, eat beans and rice, and never step inside a restaurant unless your working there. And then..... you can afford to buy a house.
Condos have association fees that can easily equal the PITI. Then there's the property taxes, additional insurance above renter's insurance etc....
Again, that depends on the individual complex and where it's located at. You have to do your due diligence with regard to the association's reserves (and any special assessments that may be apparently coming soon), the COA monthly fee, what you get for the money (maybe that higher fee really does get you a lot, or maybe you pay a low fee for next to nothing), etc.
Here in Indiana, most of the condos I've personally visited have association fees between $100-$200/month. This usually includes trash service, snow removal, general grounds maintenance, maintenance on the outside of the building, clubhouse/pool servicing, and some had water covered. Trash service alone is around $30/monthly, my water bill is around $40/month. Yes, there is a premium for condo insurance about renter's, but it's less than homeowner's because it only covers the inside of the unit and your possessions, the association will generally cover the outside, and that includes the big items like storm damage.
The issue is budgeting and living below your means to save money and put a down payment on a house. Those same skills will be needed to save money to fix things in the house when they fail.
If your spending your entire paycheck and you cant figure out how to budget and live below your means, those same people will spend every penny even if their housing expenses drop.
So no, I dont think they should buy a house. They lack the skills to be owners.
TIP: Cancel your iphone, starbucks, eat beans and rice, and never step inside a restaurant unless your working there. And then..... you can afford to buy a house.
Budgeting is critical, but it's not the end all, be all the personal finance crowd wants it to be.
In my hometown in Tennessee, median household income is a little below $35,000. Yes, the cost of living is cheap, but not so cheap that the $35k income is going to buy you a decent place. What about the half who are below that? They're even worse off.
They have an income problem - even if their personal budgeting is sound, they can't afford a home. That can't simply "cut the Starbucks" and "eat beans and rice" and magically have enough to afford a downpayment to be homeowners.
You can also find a house that is selling below appraisal enough so that you offer more than asking if the seller agrees to make the down payment and pay for closing costs.
Sellers cannot pay any part of the down payment. If you don't qualify for a VA or USDA loan, you will need to find a down payment assistance program or have a relative gift you the down payment.
Are there a few that may qualify for some social programs such as Habitat for Humanity and others? Yes.
But the vast majority that don't have any money should not jump in and buy a home that they cannot afford. As mentioned above - all sorts of extra funds are needed such as a new furnace, new roof, and on and on.
In one development of a relative some homes are on the 3rd foreclosure since 2008.
A lot of those concerns don't exist (certainly not to the same extent) if you buy a condo and obtain insurance against assessments (which, around here, only adds on a couple of dollars a month to the home owner's insurance policies I've been looking at). While I'd discourage people from having zero savings if purchasing a home, you certainly don't need to have savings amounting to the typical down payment on a house to make things work.
I know that's the conventional wisdom, but it's not always 100% true.
I rent a 2BR/1BA apartment for roughly $820/month. After utilities, it's about a grand. There are several other apartment buildings that were converted to condos in the city limits, similar to my building. Those condos run about $60k. Even if you put down a low money down FHA or conventional loan, your PITI is going to be a little over $300/month in Indianapolis. My rent is probably roughly double PITI + COA fees.
With $500/month additional cash flow, you can fix a lot of things.
The fact that no down payment mortgages are typically disallowed is not because the buyer cannot afford the home with their current financial situation. It's because if that situation happens to change in a negative direction, there is not enough incentive for the buyer (at least in the lender's judgement) to stick around and keep making payments if they don't have any skin in the game.
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