My husband and I are in the process of “buying” a home for $0. Not kidding.
I’ll admit our circumstances are so strange that seasoned mortgage loan officers scratch their heads. People just don’t get homes for nothing.
But I’ve learned it is possible in many areas of the country. Read on to find out how.
Let me be up-front: My husband and I are Christians, and our faith is a big part of the reason we’re buying a home for next to nothing. This does not mean that you need to share our faith to put the information we’ve gleaned to work for you. But our faith is a big part of our personal homebuying story.
I’m writing this article in my daughter’s half-painted bedroom, which is functioning as our living room. The windows are untrimmed, and I have a space heater pointed directly at my feet. Today was the first hard frost in the heart of Hoosier land, and we don’t have a functional furnace in our home.
If you’d told me a year ago that today I’d be working from a home of our own, instead of our one-bedroom apartment, I’d have told you that you were nuts. We were nowhere near ready to buy a home.
If you’d told me that the home I’d be living in by October 2013 wouldn’t have a functional kitchen, finished drywall, or a furnace, I probably would have run in the other direction.
But, here we are.
How did we get here?
Long story short, in June, my husband Ben and I jumped headfirst into a ministry called The Moria Project. The Moria Project is an intentional Christian community planted in a half-abandoned block on the Near East Side of Indianapolis.
A Strange Situation
When we decided to move, we thought we’d be getting our house, a duplex with one liveable (and rented) half, and one half in need of major repairs, for about $30,000. Then the ministry’s Board of Directors gave us exciting news: They’d sell us the house for whatever they owed on it.
Which turned out to be $0.
But the house still needed several thousand dollars worth of work to make it livable. At first, we thought we would just “buy” the house for nothing with a quit-claim deed and a $250 title search (just to be safe). Then, we could turn around and take out a Home Equity Line of Credit against the value of the house.
Then we found out that most lenders set the value of a home at whatever its purchase or refinance price is for a calendar year. (I assume this is to prevent people from doing too much refinancing.) This meant that if we got a quit-claim deed to our home, it would be worth nothing for a full year in the eyes of the lenders.
So we needed a more traditional mortgage that would let us “buy” the house while giving us fixer-upper funds.
But we didn’t have time for the mortgage process. With our apartment lease up at the end of August, we needed to get the house livable ASAP. So we started working with a local non-profit lending organization, while spending 50+ hours a week and every dime we could find on renovating the house.
In a month, we had tapped out our cash reserves to redo our half of the home’s plumbing and electrical, put in a bathroom floor, install a shower, put up sheets and sheets of drywall, and replace the majority of our windows. When our lease was up, we moved in.
The house still needed a kitchen, finished drywall in two of three downstairs rooms, a bathtub, and hot water for the bathroom sink.
Getting the Mortgage
Right now, this house that we’ve spent so much money and so many hours on still isn’t technically ours. Luckily, it’s owned by people we know well and trust very much. (I would not recommend getting yourself into a situation like ours unless the home seller meets those requirements.)
We’re nearly there on getting a fixer-upper mortgage. This will let us officially buy the house and give us money for further projects, starting with a furnace.
For the mortgage process, we’ve worked with the Indianapolis Neighborhood Housing Partnership. INHP, a non-profit, focuses on helping lower-income families brush up their credit, learn to budget, and buy a home.
And luckily for us, they have a great loan product that offers extra fixer-upper funds for everything from a major kitchen overhaul to painting the walls.
Loans like this, which we’ll talk about in more depth in a future article, are based on the assumed future value of the home once the proposed renovations are complete. In our case, our home would probably be worth $20,000 or less in its current condition. It still needs a lot of work. But we’ll be able to get a loan for $30,000-$40,000 because, once we finish remodeling, our home will be worth at least that.
So, we’ll end up with a $250-$350 mortgage payment, including insurance and property taxes, for the entire duplex. Our renter pays $300 a month, so we are, effectively, buying a home for nothing.
As a family, we’ve learned quite a bit. We’ve learned that we can do dishes in a bathroom sink that only runs cold water; and that we really don’t need much, as long as we’ve got each other. (And functional Internet.)
But, seriously, we’ve learned quite a bit about the types of homebuying programs, community development corporations, and loans that are out there. And now that you’ve read our twisted homebuying story (and this is the short version), read on to find out how you might put some of these homebuying options to work for you.