Buy a Home in Virginia with No Money

by benborden

There is a little known way that you can own a home with no money. No down payment and no “out of pocket” closing costs. The idea is called a “seller concession”. Seller concessions are when the home seller agrees to offer a percentage of the sales price, anywhere from 1% to 6%, as a credit for your down payment or closing costs.Very simply, Lets say you were buying a home for $150,000. In the contract to buy the home its written that the seller agrees to pay 3% or $4,500 towards all closing costs, pre-paids or points. Most all lenders allow for 3%, some even allow for 6% or in this case, $9,000. Not bad? In this Virginia housing market its very hard to have a seller agree to this. In such cases, you can just as easily increase the price of the house. So if you needed $4,500 to close, just make the purchase price of the house $154,500. That way the un giving seller receives his full $150,000 and you get into your home with no out of pocket or limited expense. I do this with over 50% of the home buyers with whom I work. Its not necessarily for first time home buyers.

EVERYONE, wants to get into a home with little or no money. I do this for home buyers at $150,000 and for home buyers at $500,000. Sellers have no reason to refuse and unfortunately not enough real estate agents know or just do not care to mention this extremely beneficial knowledge. It is very important to add that the home you are buying needs to appraise for this price, so if it does not in this instance appraise for the $154,500, your out of luck. THE BENEFIT: Well besides the obvious, points, title, attorney and all other closing cost get paid, most of these are not tax deductible, you have effectively included all costs of the loan into the mortgage and mortgage interest IS tax deductible, hence a tax deduction on all the costs of the loan and interest.

Lets look at the flip side. Not taking into consideration this tax deduction, you are effectively increasing your mortgage payment by $30 per month using the same example above. But $4,500 sitting for 10 years in a mutual fund, would accumulate to $11,622! The extra $30 a month over that same 10 years is only $3,600 extra spent for you mortgage! This number would even be greater taking into consideration the tax write of each month, further reducing the $3,600 extra per month to a much smaller number. I know almost every homebuyer that I mention this to loves the idea. Its a lot easier, they say paying an extra $30 t0 $60 dollars per month than coming up with the $4,500 to $9,000 at closing. But I think, even if you could, why would you?

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