June 30, 2006: Two out of three ain't bad when buying a home in Phoenix
Good income, good credit and a sizable down payment. That's what it takes to buy a house. Everyone knows that.
But here's some good news: Two out of three ain't bad.
If you have the income and the credit, you can qualify for a home loan with no down payment.
That's not a blue-sky promise from a late-night TV infomercial. People do it every day. You can even structure the deal in such a way that you take cash away from the closing table.
Here's how: Let's say we're buying a nice three-bedroom home in a newer community near Loop 101. We'll put $2,000 down as an earnest deposit to show we're serious. We'll ask the seller to concede 3 percent of the purchase price at close of escrow to defray our closing costs. The lender will write an 80 percent first mortgage and a 20 percent second mortgage, with the second standing in place of our down payment.
Now that second loan is going to have a much higher interest rate than the first. But, even so, it's still probably cheaper than paying private mortgage insurance.
So what happens? At the closing table we have 100 percent financing from the lender, plus 3 percent in closing costs from the seller, plus our original $2,000 earnest deposit. Depending on how the closing costs break out, you could end up taking back most or even all of the $2,000 earnest deposit. You could acquire a home with no out-of-pocket expense.
Don't rush off to Vegas, though. Moving into a home is expensive, and trips to Home Depot or Lowe's will eat up any excess cash.
There are other ways of doing this, too. If you have good income and 20 percent or more to put down, you can qualify for a loan even if your credit isn't the best. With good credit and a big-enough down payment, the lender may not even care about your income.
Having all three - income, credit and down payment - is best. But two out of three ain't bad.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
Spread the word: Click here for a printer-ready version of this column.
Or: Steal this book: I've written over 200 of these real estate columns. They are consistently one of the most popular features on our blogs. Many of them are dated and/or entirely Phoenixocentric. But many others are timeless and generic. If you want to use any of my columns on your weblog or web site, feel free. Three rules: Don't change my text, credit me as the author and give me a link back to http://www.bloodhoundrealty.com/ with appropriate anchor text. Something like this, perhaps:
Am I link-baiting? You bet. The quid pro quo is free content for your site that pulls eyeballs and excites interest.<a href="http://www.bloodhoundrealty.com/" target="_blank"> Phoenix Realtor Greg Swann</a> suggested I share this with you:
