Yes, You Can Buy a Home in A Competitive Market Without Cash—Here’s How

Buying a home is a big deal, and you’ve got to be smart about your finances if you want a good deal. Buying a home with no cash can be tough, but if you do it right, it can be a lot easier than you think. The biggest obstacle you’ll face is how to get a home loan with no cash. The good news is that some lenders are willing to lend money without a cash down payment, but they come with higher interest rates and stricter credit, income, and debt-to-income ratios.

Here’s How You Can Buy a Home in A Competitive Market Without Cash

Use Your Home Equity to Bring Down Your Payments

If you bought your home several years ago, maybe in a seller’s market, you may have equity you can use to get a lower mortgage rate. Many homeowners are finding that they have the option to refinance their mortgages and use the equity in their homes to lower their monthly payments. Financial experts recommend considering a cash-out refinance for home buying, particularly if you don’t need to move fast. By refinancing the full value of your mortgage, you can extract money to help pay for your home, or you can take out cash and use it for any purpose.

Get Pre-Qualified for A Mortgage

A mortgage is a legal document in which a lender hands over a mortgaged property to a borrower. The borrower becomes the owner upon paying back the loan and interest. Mortgages usually last 30 years. Buying a home may seem like a big decision, but it doesn’t have to be. Before shopping for a house, get pre-qualified for a mortgage. This allows the seller and investors to have a good idea of the price range in which they may purchase your home. 

Understand What Types of Taxes and Insurance You Have to Pay

For anyone who wants a home without cash, it is important to understand what types of taxes and insurance you have. You need to find out how much mortgage interest you pay and for how long. Your property tax and home insurance rates will be higher if you have a mortgage. If you’re thinking about buying a home, you may be surprised to find out that you don’t necessarily need piles of cash to make a purchase. In fact, you can get a mortgage with almost any credit score, and there are even lenders that offer home loans without requiring a down payment. The new tax laws and federal tax changes to mortgage interest deductions are driving people to refinance their homes in order to deduct their mortgage interest. And while you can refinance your home, you don’t necessarily have to take out a new mortgage.

Hire A Real Estate Agent

Buying a home is a lifetime investment, so you want to ensure that you’re making the most educated decision possible. Unfortunately, buying a home in a competitive market can be challenging—especially if you don’t have the cash to put down on your next home. That’s why hiring a real estate agent is so important. Real estate agents can help you get into a home faster because they have access to buyers and sellers. Whether they know someone who wants to sell or has a buyer they want to work with, your agent can score you home without cash.

Make A Contingency Budget

A contingency budget is kind of like a budget on steroids. Instead of just setting a target, a contingency budget requires you to also set an amount that you’ll spend on non-essentials each month. For example, you may set an amount you’ll spend on entertainment, another amount you’ll spend on clothing, and yet another amount you’ll spend on dining out. The tricky part is that the amount you spend needs to be equal to your contingency budget amount, which can be a challenge since every bill and payment is different, even for the same services. For example, your cable and internet bill likely won’t include entertainment, but your credit card may.

A home purchase is a long-term investment for most people and the largest purchase they may ever make. With house prices on the rise, it is extremely important that buyers have a stable income, their own down payment, and some extra cash set aside for unforeseen expenses. While buyers typically can qualify for a mortgage, the lenders will check to ensure that the loan will not put them in financial distress. Therefore, lenders will scrutinize buyers’ cash flow, debt-to-income ratio, credit score, and other financial factors. While lenders will assess your ability to repay the loan, buyers can stack the deck in their favor by improving one or more of these factors.