“I Bought a Home for $1800” + How You Can Buy a Home for Cheap

I've gone back and forth on if I think my first home purchase was a mistake or a good thing. Only time will tell if my finances wash out, but one thing I did do well was leverage government and city programs to get into my home for almost no money.  You read the title right. I bought my new home for $1800.  It definitely took some research and money savvy, but you too can buy a home for cheap and it doesn't require a finance background or degree!

Buy a Home for Cheap: How I did It

Well…technically I bought it for it's selling price + the renovations, but only had to bring $1800 to closing. For others who have bought a home recently or are looking to buy, this is incredibly…incredibly cheap.

Not to mention that ~$1800 is what many people pay for first month's rent and deposit on an apartment that they don't even own. I got lucky, but I was also able to buy a home for cheap by looking in distressed neighborhoods, asking the right questions, and being unintimidated by the amount of paperwork many of these programs require you to fill out. Still, taking on a downpayment assistance program with a lot of stipulations may not be for everyone. There are a LOT of hoops to jump through.

This is why it's important to assess your priorities and values before buying a home, which is something I discuss at length in my book, The Millennial Homeowner. Maybe you want to live in a better area, don't want a fixer, or maybe you just want your first home purchase to be (fairly) seamless the first time around. That's okay!

I ended up paying way more than $1800 later by taking on a renovation project I really couldn't handle, which put me into a lot of debt. I also made a ton of mistakes. Still, for those of you who have a limited budget or simply want to make a strong real estate investment, I outline my tips and tricks below.

 

How You Can Buy a Home for Cheap – The Step by Step Process to Getting Downpayment Assistance

Ask Around

Your mortgage broker or real estate agent may mention downpayment assistance programs to you, or they may not, which is why it always makes sense to ask. Or, if you're in the beginning stages of the homebuying process, do a little internet research of your own.

Just get started by opening up your browser, getting a new window,  navigating to google and type in {[state you live in] downpayment assistance programs}. Boom.

Exhaust Every Avenue

Veteran? Single Mother? You may qualify for additional grants and funds. Now isn't the time to be shy, but you have to ask around for those too.

Get Organized

Any program you may qualify for is going to take a lot of paperwork and patience during the application process. After all, nothing comes free. If you want that money, you're going to have to invest the time into getting it. I recommend in this post to get organized with all your documents before you start actively searching for a home, and if you've done this well the whole shebang will go a lot smoother.

You're going to have to pull tax records, employment forms, W-2's, W-9's and (potentially) other weirder demands like letters from former landlords, lovers, and family members.

Often it's the time and paperwork that keeps many (lazy) people from applying for these funds. In my opinion, that is leaving money on the table. For about six hours worth of effort pulling documents and filling out paperwork, I received $15,000 in downpayment assistance from the city of Atlanta.

This was very worth it to me as I was able to cover all but $1800 of my downpayment, my closing costs plus put a little extra toward the principal on my first home.

Decide if It's Worth It

Some programs (like mine) require you buy a home in a certain zip code in order to qualify for the moolah. Like in the case of the assistance I received, I was only eligible if I bought in a neighborhood hit hard by foreclosure. This is a dainty way of saying, “up and coming,” which is a daintier way of saying, “rundown.”

I had doubts at first. Friends and family are terrified to come over. But honestly, I've never had a problem and the neighborhood has turned around a lot, as I expected it to when I was out and about doing my due diligence. My program allowed me $15,000 dollars. That's a lot of money.

Honestly, if someone came up and offered you a check for 15k to live in an up-and-coming neighborhood, what would you say?

Maybe because I'm a more finance-minded person, I took the chance. And because the house was setting off my spidey sense that it would offer the greatest opportunity for a strong return on investment. Still, it's been a slow play. The downpayment assistance I received is actually a “soft loan” and it's forgiven $3,000 each year I live in the home as a primary residence. So, if I stay in the home the full five years, I'll have the total amount forgiven. By the end of five years I won't owe a penny, but if I sell (or rent) early, I'll have to pay back the balance of whatever I haven't “worked off.”

It's definitely a long play and most downpayment assistance programs aren't for big-time investors.

But it's up to you to decide what you need in your home and its location.

Read the Fine Print

Some programs only allow for the money to go toward the downpayment and not closing costs, some vice versa, and some allow for both. Be sure to read the fine print of your program's terms to understand how much assistance you're getting as well as the expectations and repayment requirements (if any.)

Ideally, you'd want your program to allow for funds to be used at closing, as this is where first-time buyers incur the most out of pocket expense, in addition to the inspection and any unexpected repairs. 

That 15,000 helped pay for my down payment, most of the closing costs, and a little bit of the principal on the loan. The $1800 was my own contribution and a $1000 program fee. I would have had to bring double that amount had I not used the down payment assistance.

Be Patient

When I was taping tissue paper over the windows of my home because it's one of those quaint-by-day-cagey-by-night neighborhoods. I had to grit my teeth. Free Money. Free Money. Again, go back and calculate how much all of this is worth per hour. It's pretty significant!

But at the end of the day not having to dip too hard into my savings to get “in” my first home was nice.

 

Additional Ways to Buy a Home for Cheap

You Can Ask Mom and Dad

Don't qualify for any programs or don't have any available in your area? You can always hit up Mom and Dad for a tax-free gift (Up to $14k per person, so $28k for you and a spouse) to help cover the down payment or closing costs on your first home.

Because of stricter financing terms post-2008 housing crash, I recommend leveraging the money for closing and moving costs rather than factoring it into the financing of the home. This also helps ensure you only buy a home you can reasonably afford.

Rate Shop

Perhaps you won't be able to swing an $1800 home buy. Perhaps you don't want to! The more you pay for a home, the more expensive it becomes, which is why if you want to keep costs low it's important to rate shop, from everything to the mortgage to the home insurance.

Getting the lowest interest rate on your mortgage is the #1 way to save money on your first home purchase. To comparison shop rates and lenders hassle-free, click here.

Buy for Now, Not Later

As millennials are waiting to enter the real estate market later in life (think 30's, not 20's), they're more likely to opt for that “forever home” and pay the price for it. The best way I was able to buy a home so cheaply is because I bought a cheap house – something small and in my budget that I could reasonably afford. Of course, this meant hard choices, and I know it is fairly obvious advice, but less is more. Personally, I believe homeownership should be a good move for your finances, and not something that contributes to more financial stress. 

Like this post? Get more first time home buying information in my book, The Millennial Homeowner: A Guide to Successfully Navigating Your First Home Purchase, now on Amazon. Click here to get your copy!

What if I told you that you could buy a home for cheap - all it took was some patience and paperwork? Yeah, it can really be that easy. See how I bought my first home for $1800.

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  • NicoleW4240
    January 14, 2016 at 7:55 pm

    That is a lot of cash – way to go!!

    When I bought my condo in Nov 2014, I didn’t know there were grants, etc. So when I recieved $7K for being a first time home-buyer, I was able to sock that cash in to investments! It was a nice little closing gift that I wasn’t expecting.

  • Samuel
    December 6, 2015 at 2:17 am

    That’s great you were able to take advantage of these grant programs Lauren. When I bought my first home in Douglasville, GA in 2004 I received a grant from the Nehemiah down payment assistance program. It helped me secure the down payment to buy my first home.

    Many people don’t know about these programs or even know they exist. I think It’s up to real estate agents and loan officers to research these programs and let future homeowners know what is out there.

  • Jen @ KeenConsumer
    November 17, 2015 at 1:06 pm

    1800 is awesome! We qualified for a FHA loan before and were planning to bring 5% down to make an offer on a home. Can I ask if your house was in move in condition or did it need renovations? How long did the entire process from start to beginning?

    • Lauren Bee
      November 17, 2015 at 9:21 pm

      It was a gut job I bought for $65,000. Put in an offer in April, close on the house 90 days later in July, but was delayed a lot because of downpayment assistance, not the FHA loan. Let me know if you have any other questions and congrats on taking steps toward homeownership!

      • Jen @ KeenConsumer
        November 18, 2015 at 12:42 pm

        Wow, 3 months is a long time to patiently wait for a new home! Thanks for the offer!

  • Giulia Lombardo
    November 17, 2015 at 8:31 am

    Honestly 1800 sounds amazing and also if I am realtor I’m looking for my dream house and I’m not going to rent, in my mind rent is a waste of money I can accept it only with Rent to buy formula…thanks for sharing:D

    • Lauren Bee
      November 17, 2015 at 9:21 pm

      Thanks Guilia!

  • John Wake
    November 16, 2015 at 5:55 pm

    Awesome post!

    • Lauren Bee
      November 17, 2015 at 9:21 pm

      Thanks John and thanks for all the love on social.

  • Cat Alford/ Budget Blonde
    November 16, 2015 at 2:46 pm

    Whenever we get ready to buy a house, we will definitely be looking into as many programs as possible to help us save money. Good tips!

    • Lauren Bee
      November 17, 2015 at 9:21 pm

      You’d be perfect for those. With your writer’s background you’ll breeze on through 🙂

  • Stefanie @ brokeandbeau
    November 16, 2015 at 10:17 am

    Sweet, I totally paid more than 1800 just to cover security and broker fee on my rental!

    • Lauren Bee
      November 17, 2015 at 9:22 pm

      Ew. Broker fees. Thankfully I always avoided those but they were EXPENSIVE.

  • Jordann @ My Alternate Life
    August 14, 2013 at 11:19 am

    That’s awesome! I love grant programs, I tapped a lot of them to eliminate my student loan debt. Once I’m ready to buy a home of my own, I’ll definitely remember to check out what’s available!

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