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A FIRST TIME BUYER’S DILEMMA: HAVING LITTLE TO NO CASH

Posted by Mike Jordan on September 11, 2019
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Picture this: You finally found your dream home with the perfect backyard, great living space, and those kitchen counters you’ve always wanted coupled with functional appliances. You tick all of the boxes off from your checklist. You reach in your pocket to hand them the cash to close the deal.

Only to find out that it’s empty.

One of the biggest challenges of buying a property is having little to no cash at all. We understand that you may feel discouraged especially if you’re new to investing in real estate. However, not having the finances to pay up doesn’t mean it’s all over. Strategy Properties realizes the need for buyers and investors to close out a deal. Here are a few alternatives to buying a home without the right amount of cash.

Consider applying for a loan

There’s a myriad of financing options for buyers that they can choose from. Take time to research a few of the loans that you are eligible for. We’ll be listing common ones starting with:

1.Conventional loans

This is ideal for buyers looking for a low down payment. First time buyers can apply for this loan with as little as 3% for their down payment. On top of that, if you manage to at least bump it up to 20%, you won’t have to pay mortgage insurance. This is probably the most difficult loan to apply for since it has a relatively strict guideline to be followed such as a high enough credit score, lower income to debt ratio, and a need for private mortgage insurance. Conventional loans are classified into two:

  • Conforming – a mortgage equal to or less than the amount set by the Federal Housing Finance Agency (FHFA) and meets the criteria of Fannie Mae and Freddie Mac.  This is ideal for buyers with excellent credit because of the relatively low interest rates attached to them.
  • Non-conforming – also known as jumbo mortgages. This loan carries a high risk rate since these are less attractive to the market. The guidelines are usually set by the lending institution underwriting the loan. 

2.Federal Housing Administration (FHA) loans

This is the go-to loan for most homebuyers because of lower down payment requirements compared to conventional loans. In addition to a lower upfront loan costs (at least 3.5%), the credit score required is lower as well. At least a score of 580 allows you to qualify. If you manage to cover 10% of the down payment, you can apply for the loan if your score falls between 500-579.

3.United States Department of Agriculture (USDA) loans

Also known as the Rural Development loan. This is a zero down payment loan for eligible urban and suburban buyers. You can obtain this loan to purchase a new or existing property located within a designated rural area. Applicants with credit scores around 640 or higher receive streamlined processing.

4.Veterans Affairs (VA) loan

This is a loan backed up by the Department of Veteran’s Affairs for active-duty service members or veterans and their family members. Some of the benefits are no minimum credit score and no down payment or mortgage insurance once you qualify.

There are programs that are available at both the local and national levels that offer assistance financially to distressed buyers. Try to find out about these programs with real estate investors or government agencies since they vary from state to state.

Homebuyer assistance programs

  • Step Forward Michigan

This program was announced by the Michigan State Housing Development Authority (MSHDA) which involves a $15,000 forgivable loan covers the down payment, closing costs, and principal reduction for buyers. The program sets requirements on household income limits and a minimum credit score. Buyers are only eligible if they are under the 61 zip codes that the program listed.

  •  Michigan First Home

If you find yourself not covered under the state or zip code required by the Step Forward Michigan program, you can turn to the MI First Home assistance program instead. This covers up to $7,500 in down payment including closing cost assistance and is available in all zip codes across the state.  

Have the seller pay for the closing costs

A seller concession lightens the blow of having to deal with coming up with a down payment and having to cover for closing costs. The idea behind this is that the seller handles the whole or part of the closing costs in your behalf. If you were in the shoes of the seller, understand that they simply won’t pay up for the closing costs as a kind gesture. There are a few ways that you can sway the seller if it’s done right.

  • Raise the price

For instance, let’s say the seller is looking for a price of $150,000 for their home and you assume a figure of 3% for the closing costs. If you were to divide the price by 0.97, that leads to an $154,639. You could offer that dollar amount to the seller dependent on that $4,639 credit. Even with paying the credit, the seller still nets the original sales price.

  • Accepting the home “as-is”

This is applicable for sellers dealing with escrow. Accepting the current condition of the property encourages the seller to agree to the deal especially if it doesn’t include any demands for maintenance and major repairs. 


Having no funds is as complicated as it is, especially when planning to purchase a property. First-time homebuyers usually share the same problem when it comes to financial support. Strategy Properties can take the time and effort in making sure that you find the right options in order for you to buy your own home. Contact us now at (734) 224-5454 or email: info@strategyproperties.com.

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