Generally, not a good way to get a home with little down. Here's why -- the owner needs enough of a down payment to cover his cost of selling -- the brokerage fee and assorted closing costs. Expect to put 10% or more down, though exceptions do exist. "For Sale By Owners" ("FSBOs")may be an exception, with lower closing costs, but there are big risks in dealing with "FSBOs" and you need to be exceptionally careful. First, many "FSBOs" don't understand or try to avoid consumer protection and fair housing laws; they may be selling themselves because they don't want to disclose a property defect and they know that a real estate licensee must disclose it. Second, many FSBOs have their homes priced unrealistically high. If you are simply looking for your first home, the higher price and usually higher interest rate may be worth it to get your foot in the door, but for investors a 3% price difference coupled with 1-3% higher interest rates can make or break you.
Two exceptions to the general rule are for the owner to "carry a second" note and deed of trust (mortgage) for part of the downpayment (you get a first mortgage from another source) or to owner finance with a deferred downpayment (usually in the form of an addition to the monthly payment). An owner "carrying a second" may help you qualify for a "nonconforming" loan from a mortgage company. Ask your real estate agent® about available properties where the owner is willing to carry a second. Deferred down payments usually require a deferred commission arrangement, so look for "owner-agent" properties.
In the Joplin area, if you would like help in finding these type properties, try out the AGENT ONLINE ™ Service. Specify that you are looking for low down properties on the form and mention this page. You'll get automatic email updates of new listings that meet your needs. You can also, follow this link to contact me by phone or email. Outside Missouri and over about 50 miles from Joplin, please Contact me by email and I will refer you to a real estate agent ® in your own area who can help.
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