Getting a loan or financing to purchase a home may seem like a pipe dream. But I am here to tell you that it is not. Today I will introduce you to 4 creative ways a millennial can finance the purchase of a house. I will cover the following:
- FHA Loans
- Down payment assistance programs
- Student Loans
- Seller Financing
Before we dive in let me give you some words of encouragement. These words are coming from a gnarled old real estate investor that has seen it all. I am here to tell you that even now, with the real estate market high but wavering there are still plenty of great opportunities to buy a house.
Let’s get creative!
Current State of the Housing Market
Since the great recession house prices have skyrocketed. We have been reading these headlines for a decade. For those of you who are renting, it may seem the time to buy a house has passed. It hasn’t and here is why.
I have run the numbers on buying, selling, and renting houses more times than I can remember. Guess what I discovered? It is always a good time to purchase a home. If you don’t trust me listen to this experts at financer.com who believed:
“The headlines can be interpreted many ways. Savvy investors are still obtaining cash to finance investments for a real estate business. You might have thought the well had run dry.”
Reality Check
Don’t confuse buying as possible as buying a house is easy. Buying your first home is not easy. It will require sacrifice and hard work. But if you get creative and get it down you will have taken your first step towards financial freedom. I only wish I had started sooner. Learn from my mistake and go buy your home!
Who Am I?
My name is Shaun Martin. I have been a real estate investor for over 20 years. While you will never read about me and my real estate successes in the paper, my friends and associates all believe I have been very successful buying, selling, and renting houses.
I live in the Centennial State, Colorado. Denver, CO has been one of my primary housing markets to invest in. Believe me when I tell you I purchased an investment property in February 2022 with a legitimate cap rate of 11.3%. It required me to do some work. Stabilize rents. This is a value add investment property situation. My point is even at house prices at historic high levels opportunities are there. Be patient, be savvy, and most of all work hard.
To learn more about Shaun Martin and his real estate investing strategy check out his business website, We Buy Houses In Denver, using this link where sellers get cash offers to sell their house fast in Denver, CO.
FHA Loan
An FHA loan can require as little as 3.5% down. The credit score requirements are lower also. This is because the loan is backed by the federal government. This makes lending much less risky for the bank. FHA loans are designed to help millennials, or anyone buy a primary residence.
If your credit score is above 580 you can qualify for financing with 3.5% down. If your credit score is between 500-579 you would need to put 10% down. Because of the lower down payment you will be required to buy FHA mortgage insurance. This is an extra cost you must factor when running numbers on buying a house.
Down Payment assistance programs
There are many programs that will give home buyers money for a down payment. Some of these programs will require you to pay back the money. Some will not. Down Payment assistance programs can be found through local, state and even federal levels of government.
Each program will have different rules and regulations. Normally they are offered to people that are buying a house as a primary residence. Down Payment assistance programs can include grants. Some grants do not need to be paid back. Other forms of assistance come with low interest rates or even no interest.
As the name suggests, down payment assistance will take care of the down payment. You will still need to find a lender. BUT LET ME ASSURE YOU OF THIS. If you are diligent enough to find and obtain down payment assistance you will absolutely be able to find a lender to finance the purchase of your home.
“There are many down payment assistance programs for homebuyers in California. As a real estate agent, and real estate investor in Chula Vista I have been involved in many home purchases where the buyer obtained down payment assistance”, said Alex Capozolo of SD House Guys, a cash home buyer and seasoned investor with a portfolio of properties across the country. “Down payment assistance is a legitimate way to help purchase your first home. People of any age, including Millennials, can access assistance in the form of loans or grants.”
Alex has a unique approach to real estate investing as a real estate agent, value add buyer and 100% transparent fellow I would encourage you to learn more about his business model via this link that gives sellers fair cash offers and fast closings in Chula Vista, CA.
Use Your Student Loan
Using your student loan to buy a house is not exactly above board but can be a path to buying a house for a savvy millennial. I just wouldn’t exactly tell Uncle Sam about it. That said, a student loan is a reasonably easy way to get money for a down payment.
While I dont advocate doing anything below board on a financial level I have run the numbers and using a student loan to finance the purchase of a house makes sense. Let’s think this through.
You are going to College. You live in a “student house” with 5 other people. You all pay the owner of the house $1200 a month – EACH! You don’t need to be a smart cookie to see that it is $7200 a month. Now imagine you find a house for sale for $1,000,000. The monthly payment would cost you $5800 a month.
Do you see how this can work?
“When I was in school, buying a house seemed like an impossible task. However looking back it was 100% doable. If I had used my student loan as a down payment and then rented out the rooms I would have hacked my way to financial freedom much sooner.
Like down payment assistance programs you will still need to obtain financing but you will have a huge leg up taking this frame of mind.
Seller Financing
Seller financing is when the person that is selling the house becomes the bank. This is not uncommon but often comes with its own set of challenges. The seller will dictate the terms of the loan. Typically interest rates are higher. Also the amortization period is normally shorter. However, if the price of the property is low enough getting financing from the seller could be a great option.
“The first house I ever purchased was with seller financing. At the time interest rates at the bank were 4.5%. The seller gave me 8% with 2 points at closing. It seemed steep at first but the house was perfect for renting out several rooms. By paying the higher rate I was able to buy a house, rent out some rooms, and gain some equity. PLUS – the cherry on top was the house appreciated 10% over 12 months. Seller financing paired with house hacking worked out brilliantly for me!” Robert Hommes, Denver, Colorado – Real Estate Investor for 6 years.
Conclusion
There are real opportunities to get financing and buy a house in any real estate market. This is a fact. It may not seem possible but trust me and thousands off people that can use hindsight to come to this conclusion. As a millennial you may need to employ several real estate investment strategies. House hacking is one that I would highly recommend you learn more about.
The key to real estate is buying the right property for the right price. Then simply sell it when you want to, not because you have to. Follow this link to learn more about FHA Loans and FHA loans in Texas from a trusted resource. Happy home buying to all the Millenials. Now get creative and go buy your home!
