I am going to walk you through the details of how my client bought a home for $1,010. Insignificant information will be changed to protect her identity. This is not the picture of her house :)
A friend came to me earlier this year and wanted more information about how to buy a house. I put her in contact with two of my best lenders and she chose the one she liked the most. This lender reviewed her income, debts, and asked about her expectations with purchasing a home. The lender approved her on the spot for a 150k house, or a 135k townhome plus HOA fees. This client did not have extra cash for a down payment or additional fees that accrue when you are under contract, so my lender was going to set her up with a down payment assistance program.
Side note: find a lender with good communication and who has great reviews from past clients. Your Realtor often has the best connections to such lenders.
My client and I began our house search and looked at roughly 5-7 homes before she saw a townhome that she loved. This particular home came up for sale on a Wednesday night and we were in the door at 8am Thursday morning. We were literally the first ones in the door and it was clear that this was her place.
The details of the offer:
We wrote an offer for 131k, even though the asking price was 118k. We offered 1k in Due Diligence Funds and $500 in Earnest Money and promised a quick closing. We also wrote a sweet letter to the seller explaining why my buyer loved the home, and a picture of her dog to hopefully pull on her heart strings.
Side note: To save my client cash, this Due Diligence and Earnest Money is allowed to be a gift. She borrowed this money from a family member, so she bought this home without paying these extra fees and without a down payment!
We were the first buyer in the door and I sent the offer to the listing agent just a couple of hours later. The seller decided to wait until Saturday night to get back to us because they received multiple offers. The seller finally responded that she loved the letter from my buyer and she was choosing our offer mostly because of it. My buyer won the multiple offer situation and went under contract!
How she bought the home for $1,010
My lender set my client up to receive a grant from NC Housing. This grant offers up to 8k in down payment assistance, fully forgivable after 15 years of home ownership, and forgiven on a tier system after 10 years. Even if my buyer decides to move in less than 10 years, the idea is that the home has appreciated to say, 150k, and paying that 8k back is no problem.
While under contract, the home didn’t appraise (which happens a lot in multiple offer situations). The home appraised for 126k, and when the seller would only come down to 127k, my buyer agreed. This means she would only receive a loan for 126k, and would have to bring an extra 1k in cash to closing.
The lender arranged for a 5% down payment loan plus the 8k in down payment assistance. This meant:
Purchase price of $126,000
A loan amount of $122,220
5% down payment on a 126k house = $4,780
Closing costs accrued while under contract (meaning inspection fees, appraisal fee, bank fees) = $3,230
Total cash needed to close (4,780+ 3,230) = $8,010
Minus down payment assistance grant= $8,000
Buyer must bring $10 to closing
Difference in the purchase price and appraised value= $1,000
Buyer must bring $1,010 to closing
It's truly incredible to think that she almost brought a $10 bill to closing if the home had appraised! Still, she was very happy to bring $1,010 and be able to call herself a homeowner. Each state is different and it's important to ask an expert Realtor about your options. If you're in Charlotte NC and the surrounding SC area, I'd love to help you. If not, I specialize in finding great Realtors around the country. Message me and let me put you in contact with one of my coworkers, for free!