4 strategies for saving money when buying a home in today's crazy and unpredictable market

For many home buyers, buying a home now can seem like a very expensive dream. The mortgage interest rate is still in the uncomfortably high mid-range of 6% for 30-year fixed-rate loans. And Realtor.com® economists expect home prices to rise 5.4% year over year in 2023.
These sources say that buying a home right now is an expensive endeavor. But that doesn't mean your goal of home ownership is out of reach.
"The key to buying a home on the cheap is knowing how to balance making your dreams come true while staying within your budget," says Casey Ames, owner and CEO of Taylor Jene Homes in Boise, ID.
If buying a home is on your horizon, but affording things like a down payment feels like an uphill battle, take a look at these tactics to get a home on the cheap. relatively.

1. Get a loan with a low down payment or no down payment

Most home buyers are nowhere near being able to make a 20% down payment. But good news: You may qualify for a loan that requires you to put very little money down at closing.
A Federal Housing Administration loan allows you to make a down payment of up to 3.5% of the purchase price as long as your credit score is above 580.
Anyone who qualifies for a Department of Veterans Affairs loan or a USDA loan can put it down as low as 0%. Although requirements vary by lender, borrowers generally need a minimum credit score of 620 for a VA loan and 640 for a USDA loan
However, be aware that the guidelines for a government-backed loan can be quite strict, and you'll be interested in things like mortgage insurance and an inspection conducted by the US Department of Housing and Urban Development.

2. Check out down payment assistance programs

If finding a nest egg is your biggest obstacle to homeownership, experts recommend researching down payment assistance programs in your area.
These programs help homebuyers qualify for grants, low or zero interest loans and other arrangements to provide a lump sum.
"You may get help covering some of the upfront costs of buying a home, or you may even be eligible for a grant and have the full cost covered," says Ryan McMahon, San Diego homebuilder and founder of Sell House for Cash San Diego.
Eligibility is based on your credit history and household income. The details vary by state and by program, but generally homebuyers using a down payment assistance program are required to complete an education course and purchase at an approved location.
To find a program, start with your state's housing finance authorities, the local homebuyer programs page on the HUD website, and the Consumer Financial Protection Bureau's directory of HUD-approved housing counselors.

3. Use a family gift for a down payment

Some home buyers have generous family members who want to help them make a down payment. Using a gift to pay for a home is fine, but there are rules.
When lenders are looking at your financial viability, they will look at more than your credit score and income. They will also study your assets to determine where they came from. If a friend or family member does give you money for a down payment, they will want to confirm whether that amount is a gift or a loan. A loan that needs to be repaid will present problems because it can interfere with your ability to make payments to both the lending institution and your personal lender.
The gift can be used in cash, but you will also need to secure a gift letter stating the amount of the gift and confirming that it does not need to be returned. You will also need to provide evidence of the transfer of funds.
There is no limit to the amount of money a family member can give you. But if it's more than $15,000, the family member will need to file a gift tax return disclosing the gift.
Before you secure the funds for a gift, talk to your lending institution. Individual plans have different policies. For example, VA loan programs allow you to receive a gift from almost anyone. FHA and USDA loans allow gifts from family and friends. Conventional loan programs often require that gift money come from blood relatives such as parents or children.

4. Consider auctions, short sales, and more

When looking for a good deal, keep an open mind about the type of property you're looking for.
"Buying a home at auction has several advantages for both parties," says Matthew Daly, CEO of Tiger Financial, a loan broker. "A buyer will get a quick sale, choose the asking price and know what other bidders are willing to pay."
Daley also recommends looking for short sales. In a short sale situation, homeowners still own the property, but the bank allows them to sell it for less than what they currently owe on the mortgage.
"It is mainly designed to save the bank the trouble of a legal foreclosure, but it is an excellent method to find an inexpensive house," says Daly.
There are other options as well.
"I would recommend searching the listings with the keywords 'TLC' or 'fixer upper,'" says Brian Davis, real estate investor and founder of SparkRental. “But unless you have experience renovating homes, avoid anything that requires a permit. Stick to cosmetic problems."