How to Buy a Home for $2000
Today I want to share with you the exact strategy, formula and blueprint that we used for over two dozen clients in the last year alone to help them get into a home for $2,000 or less.
First of all, there are three big strategies we want to be talking about.
Zero download programs
The first one is the zero download programs. You're going to need to take advantage of those if you're trying to get into a home for $2,000 or less. There's three good programs out there that we like a lot. The VA program is awesome. There's no private mortgage insurance there, so if you're a veteran, that's definitely the place to look. There's also the USDA program, which is what we call the rural loan program. It's east of Highway 9 and north of Highway 2 to qualify for those outlying areas, but again, it's a great zero down loan program. Then we've got what we call the state bond program, which is ran by Washington state. They set the interest rate on that program, but it is a really good program. You're out of pocket. You need to make sure that you're using a zero down loan program.
The second strategy you need to be thinking about is your closing costs. Closing costs are going to be things like your prepaid taxes, interest, appraisals, credit reporting fees, mostly lending fees and prepaid things that you'd be incurring before you close on the property that'd be put in your escrow account. You need to have a strategy for that. There's two main strategies you can use.
The first one, if the home's been on the market for a while, you could ask the seller to give you a certain amount of dollars back in closing costs. Say for example, the home is $400,000. You ask them to give you $8,000 in closing costs. They're going to walk away with $8,000 less dollars. Every dollar they give you is a dollar less they have, but at the end of the day, then that just helped you get all of your closing costs covered.
We always tell our clients budget one and a half to 2% for closing costs. We always coach our clients, you're better off in most cases getting closing costs covered by the seller than you are getting dollars off. It costs the seller about the same or exactly the same, so you might as well take advantage of that. Saving $8,000 on the purchase price of a home doesn't save you a ton of money monthly, so think about the cash out-of-pocket there. The other thing that you can do is if the home is competitive and the seller won't give you dollars for your closing costs, which happens a lot in this market, in particular in the lower price points, you can increase the purchase price $1 for every dollar you want back.
Again, the example of the $400,000 house, let's say it's just been on the market for a day or two. The seller's not going to give you any money in closing costs. You could offer them $408,000 with $8,000 back in closing costs. They have now netted $400,000, which was their full price, and you're getting your closing costs rolled into your mortgage. That is strategy number two.
How to spend that $2,000
We started with zero down loan program. Then we talked about the closing costs. The third and final thing I want to share with you is how to spend that $2,000. There's two things you need to be thinking about. First is earnest money. Earnest money is required anytime you purchase a real estate or real property in Washington state. I would recommend $1,500 of the $200,000 to be spent for your earnest money. That's going to be held by the escrow company. It'll get rolled into your closing costs at closing or you'll just get it back if all your closing costs have been covered, but you have to have that $1,500 ready to go within two days of when you get an accepted contract.
What are you going to do with the other $500? You're going save it for your home inspection. We want you to still inspect the home you're going to buy. It's a big decision. Save that $500; pay the inspector so you know exactly what you're getting. Don't waive your inspection unless it's some very unique circumstance. If that unique circumstance does come up, really think through that carefully and talk with your agent about it. Boom, there you go, $2,000. You are in to a house. You've made that transition from renting to home ownership. You now have the benefit of appreciation of building your own equity, and of course the massive tax benefits as well.
If you're renting and your rent is over $2,000 a month, you want to look at these strategies. If you've got a 620 credit score, you're probably going to qualify for most of these loan programs. Get off the fence and stop being a renter and think about becoming a home owner. Again, this is the exact strategy and formula we used with over two dozen clients in the last year to help them make that transition from renting to owning. We'd be honored to help you do the same. Send us a message!