How to afford a Home with little money

I run across many first-time homebuyers that have trouble coming up with money for closing costs or downpayment. This seems to be a hurdle on the road to homeownership for many people. But with decent credit (600 or above) you can qualify for many community programs that allow 100% financing at competitive interest rates.

In addition to these programs there are a few tricks and techniques that one may consider when making a purchase.

Technique 1:
If you are limited to only 3% closing help from the seller (because of a particular loan program), consider asking the seller to pay for all state transfer and recordation taxes. This is customarily split between the buyer and seller in most states, but you can ask the seller to pay for the whole amount. This is usually not considered "closing help" by lenders. This can save the borrower an additional 1% of the total loan amount.

Technique 2:
If you secure a loan that is 100% financed, it is not necessary to purchase Owner's Title Insurance at settlement. Owner's Title Insurance protects the owner's equity in a property. If you have 100% financing, you do not have any equity, the lender has financed the whole amount. The only insurance that is required is Lender Title Insurance. This can save you hundreds to a couple of thousand dollars at settlement.

Technique 3:
Closing on or near the end of the month will also reduce closing costs. When you close on a property, you must pay all the interest due for the remainder of the month. So if you have 1 or 2 days left in the month, you will only have to pay 1 or 2 days worth of interest for that month. If you settle on the first day of the month, you will have to pay 29 days of interest up front at settlement. So scheduling a settlement at the end of the month will save you close to one month's mortgage payment at settlement.
Note: This is a pay now or pay later scenario. In essence you end up paying the same thing in the long run, just not all on the date of settlement. Technique #3 helps if you have tight monthly cashflow.

As always, consult your mortgage professional and settlement attorney before considering these techniques. If all goes well, hopefully it will lead you to acquiring that first house.