How to Buy A House for Free

Do you live in your parent’s basement and want to live on your own? Buying a house is not as stressful as your family might think. It is even possible to buy a house completely free with zero down and without paying those closing costs.

1. Pick the Right House 

Before deciding to buy a house, you must first like the house. For this to work more in your favor, I’d suggest buying a house a little bit bigger than you need it to be. As a rule of thumb most investors use is to add 2-3 additional bedrooms than what you're going to use, and you can use the same rule for the bathrooms as well.  So, if you're going to use a single bedroom, then aim for a house with 2-3 bedrooms and so on.  This will be very beneficial to you in the future.

2. Get a USDA or a VA Loan 

The United States Department of Agriculture (USDA) and the Veterans Affairs (VA) can approve you with a loan to help you not having to pay for a down payment. Technically, you would still be paying a down payment to help you get approved for a mortgage, but instead of spending the money that you have you'll be paying the down payment with the USDA or VA loan.

3. Get a Mortgage on the House 

Pick a house that suitable for you and get approved for a mortgage. To get approved for a mortgage, most banks and lenders look for a credit score that’s 620+. Depending on your credit score and the value of the house you're after, you’ll end up with a 3-8% interest rate over what's usually a 30-year term agreement.

Tip: Ask the seller of the property to pay for the closing costs. If your nice enough, it’s possible to do it and it is very likely. 

So far, you're probably questioning how to buy a house for free since now you have a mortgage that you must pay.  Here's the trick to the whole thing.

4. Rent Out Each of the Rooms you are not Using 

Depending on the area and your monthly payments of the mortgage, you can charge from $300 - $600 per bedroom and use that money to further pay off your mortgage. I recommend to not pay off your mortgage completely until a few months after you have received the mortgage, this will increase your credit score a lot more than paying it off full within the first month since the top three credit bureau pull your report once a month.

Renting out each of the bedrooms will not only help you pay off the mortgage but also generate you some additional income alongside your day job.

Some people even use these steps and not even live in the house. They would rent out the whole house and the price is based on each bedroom that the house has.

Here’s a breakdown on the math: 

So, let’s say there's a 3 bedroom & 2-bathroom house worth $150,000. If the gong rent for the houses around is close to $700 a month for a 3-bedroom house, then you can rent out each of the bedrooms for $250 for each room.Making $750 a month if all 3 bedrooms are rented out. If your mortgage on the house is a 30-year term at a 3.5% interest rate and not including property taxes, your monthly mortgage payment would be $431.25 a month. Even if you only were to find two people to rent from you in the house, you will have $68.75 additional income after you made the mortgage payment for that month. For a total of 3 bedrooms, you would have an additional $318.75 for that month.  

In recent months, the government has encouraged its citizens to buy houses by lowering interest rates. The recent lowering of rates was an effort for the Fed to stimulate the economy and MarketWatch said in their article about it states, “Continued downward movement in the 10-year Treasury would normally signal downward movement in mortgage rates. Where they stand now, Treasury yields suggest that mortgage rates still have some room to move lower, said Rick Sharga, a mortgage industry veteran and president and CEO of CJ Patrick Company, a financial-services consulting firm. “I wouldn’t be surprised to see 30-year loans with 3.0% rates before things settle back down,” Sharga said.” In other words, the lowered rates would further lower the already low mortgage rates down to the consumer level.

Buying a House for Free

If you are needing to buy a house, then that is a way to buy a house for free to finally move out of your parent’s basement. There is some thinking you’d have to do, but don’t stress yourself out over the finances and the process. Buying a house is simpler than you might think.



Sources:
Passy, Jacob. “What the Fed's Surprise Interest Rate Cut Means for Mortgage Rates.” MarketWatch, MarketWatch, 5 Mar. 2020, www.marketwatch.com/story/heres-what-the-feds-surprise-interest-rate-cut-means-for-mortgage-rates-2020-03-03.