If you're looking to get into the housing market, a listing that's advertised as requiring little or no money down can sound like a great deal. But is it really?
Before you decide, you should consider who this type of advertising appeals to and why this pricing tactic is being used. You may just find that what sounded like a great deal can actually end up costing you a lot more money than you needed to spend.
Low or zero-money down payment listings will most appeal to those buyers who don't have a lot of financial resources to work with. Such buyers will typically have difficulty qualifying for a mortgage loan from a traditional lender. So why would a listing want to attract this kind of buyer? There are many different reasons. It may just be that the homeowner is anxious to sell quickly, particularly if they've already bought another property. Or it may be that there's a lot of competition for sale in that particular area, or even on the same street and the sellers want to offer something extra to help their home stand out from the rest.
However, there are other reasons that will not benefit the buyer. One such reason is that the home's price has been somewhat inflated, but the seller is hoping that the ‘zero money down' tactic will attract those buyers that have few other options to choose from. They want to focus buyers on the aspect of how affordable it is to get into the property, rather than on the final cost. Whether or not the listing may be overpriced, a low down payment offer is often tied to the buyer taking out private financing – sometimes with the seller or someone connected to the seller – at a very high interest rate. In cases like this, what first sounded like a ‘bargain' can, over time, cost you much more money than you'd pay for another comparable property with traditional financing.
The bottom line here is that you should exercise caution where properties advertise a low down payment. Here's where your Coldwell Banker real estate professional can help, by providing you with a Comparative Market Analysis (CMA) of other homes in the area. This will help you determine if a home has been properly priced within today's market. Your Coldwell Banker professional can also advise you on current mortgage rates and creative financing options. There's no reason why you shouldn't consider a low down payment listing – just go into it with both eyes open! With some expert advice from your Coldwell Banker professional, you can make an informed decision that's right for you.