How to buy a house with none of your own money
More commonly referred to as creative down payment options.
Did you know that you can still buy a house in 2015 with no down payment (of your own money), cause sadly the days are gone where the zero down payment was available. So here are all the options including the one where you have spilled blood, sweat & tears and saved it yourself.
1) 5% saved from your own resources. You have worked long and hard and you have been able to put away a few dollars. If this is you I must congratulate you and say that you have job well done. However before you pat yourself on the back there are a few things you should know. The lender will ask for confirmation that you have had the funds in your position for at least 3 months. To do this you just simply have to provide bank statements that show your name, your account number and the balance. This is to prove that you did not borrow it, but we will get to that later.
2) RRSP Home Buyers Plan. You can borrow up to 25,000 from your registered retirement savings plan ( tax free) and have 15 years to pay it back as it is considered a loan. If you buying the home with someone else who is buying for the 1st time then you can borrow up to 50,000. This is a great way of doing it as you most likely did not miss the automatic deduction off your pay check the past few years anyway.
3) Gift letter. As in it’s all in the family, borrowing the downpayment from a blood relative. Like Mom, Dad, Sister or Brother. This is a true gift and not a loan, and the mortgage lender is some cases will ask to see confirmation that the funds are in your position before giving you an approval. They also require a signed gift letter by all parties as well.
4) From Peter to pay Paul. This is the one that most people are not aware of, where you can borrow from existing credit to make up your required downpayment. However here is the kicker, you must be able to debt service both the mortgage and the borrowed downpayment to make this happen. It can come from your credit card, line of credit or existing mortgage. You should also know that not every lender allows this type of downpayment, but for those that do it makes an excellent way to make the leap into home ownership.
This concludes our lesson for the day. However don’t forget that will need more than the minimum required down payment to close your transaction. You will also need deed transfer tax ( 1.5% of the purchase price) plus legal fees. The lender will need confirmation of the former along with your deposit.
Feel free to contact me if you have any questions.
Cheers,
Pat
