First Time Home Buyers


How to Get Your

First Home for Free

Is it really possible to obtain your first home for free? Depending upon your definition of free, yes, it is. We define free as other people paying the bill for you. If your employer provided you with a new car, the title was in your name, and your employer made all the car payments, would that be a free car for you? By our definition it would, and we believe that it would meet the definition of free by most people's standards.

Now, using that same principle, if your were able to buy your first home and other people made all the payments for you, wouldn't that qualify as getting your first home for free? We think so, and that is the purpose of this article: to show you how it is possible to get your first home for free.

Real estate financing is divided into two categories; loans for owner-occupants, and more expensive, more difficult to obtain loans for investors.

"Investment financing" is for buyers who do not physically live in a property, but simply own it and rent it out for the income it will produce. "Owner-occupant" loans are for personal homes, places where the owner lives within the property.

Owner-occupant financing with little down and low rates is typically available for the purchase of  a single-family house, as well as apartment buildings of up to 4 units. You qualify for owner-occupant financing for properties with one-to-four units as long as you live in one of the units as your primary residence.

The primary benefit of being an owner-occupant is that it allows you to buy more than just a house or condo with easy to obtain owner-occupied financing. You can actually buy property that produces rental income and increases your tax deductions.

Let's say you buy a property with four units. You'll live in one and rent the others, and each of the three rental units has a fair market rental of $1,000.

In this situation you're likely to get two benefits. First, the lender will count some portion of the rent -- say 80% -- as income for you when determining your qualification standards. In other words, $2400 a month will be added to your income. ($1,000 x 3 units = $3,000. $3,000 x 80% = $2,400)

Why $2,400 and not the entire $3,000? The lender knows you'll have vacancies from time to time, repairs, insurance, taxes and other costs associated with the rental units.

Even though the lender only uses $2,400 as income for qualification purposes for the loan, $3,000 is still your gross monthly rental income. At an interest rate of 6.5% for 30 years, $3,000 per month would pay the monthly mortgage payment on a loan of over $470,000.

While in it not possible to purchase a 4-unit rental property in most major metropolitan cities for that amount, it certainly is possible to do so in all other areas. If so, the net result is that the rental income from the other 3 units would make the monthly payments for you. And that would mean that you'd be getting a property in essence for free.

If this interests you, you'll definitely want to investigate the complete details. Speak with appropriate professionals. Lenders can advise you about available financing; real estate brokers can provide information regarding local rental properties, and you'll need a qualified accountant to explain the tax consequences of multi-unit ownership.

It is highly recommend that you also visit the First Time Home Buyer Grants page for free assistance with the down payment. This will make it possible for many people to qualify for a first time home buyer loan who wouldn't have qualified without the grant assistance.

Return to the First Time Home Buyer Programs for other types of 1st Home Buying assistance.

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