While there are many ways to by-pass the down-payment requirement, this article is about yet another way to buy a home. This approach is to share the equity in the home.
A simple way to think of this is that you will come up with some of the down payment and your equity-sharing partner will come up with the rest of the down payment. The County of San Diego has such a program to help you buy a home. The buyer comes up with 3% of the purchase price and the county comes up with 17% of the down-payment for a total of 20% down. This allows the buyer to avoid mortgage insurance altogether. This is a significant benefit as it can run several hundred dollars a month.
For example, a $450,000 home would require $13,500 from the buyer. Then the County will pitch in $76,500 for a total of $90,000 down and a mortgage of only $360,000. This smaller mortgage means smaller monthly payments. As the down payment is 20%, you avoid about $300/month in mortgage insurance!
The county’s program comes with several strings attached but you can craft a similar program with someone looking for capital appreciation. They might be open to minimizing the requirements placed on you as the buyer. Perhaps Mom and Dad want to tap into Real Estate’s 6 to 10% annual appreciation versus a CDs 1 to 2% interest. They can do this while helping you get into a home of your own. You can even agree that within a certain number of years you buy them out at a pre-arranged amount. No commission needs to be paid, though you will still have escrow, title, loan and appraisal fees when the time comes to refinance to buy them out.
There are many different ways such an arrangement can be made to work and there are benefits to both buyer and equity-sharing partner. If you’d like to explore this or other ways to buy a home, ask for an appointment so we can discuss your situation and different approaches to your concern(s). If you prefer, you can also call/text me at 760 622 5087. The solution is out there, we just need to find the best one for you.