You’ve got the monthly income and you’ve cleaned up your credit. Now there’s only one thing standing in the way of you purchasing your first home: the cash.

If you’ve got relatives who will give you the cash you need (U.S. tax law currently permits an individual to give a gift of up to $10,000 per year to someone without triggering the gift tax), great. Approximately 15 percent of first-time buyers receive financial assistance from a relative, according to the most recent survey from Chicago Title & Trust.

But if you aren’t likely to receive a gift or an inheritance when you’re ready to buy, there are a few other options you can consider:

  1. Seller financing. If you can qualify for an 80 or 90 percent mortgage, but are missing some of the down payment, consider asking the seller to take back a second mortgage for the amount you need. If you have 15 percent of the purchase price (plus some cash for closing costs, you might ask the seller to take back another 5 percent, so you can qualify for an 80 percent loan-to-value mortgage and avoid private mortgage insurance. Consult with your lender to see what the limitations will be for that second loan. You might also ask the seller to take back the entire mortgage (if he or she doesn’t need the cash for another purchase) which may be easier and cheaper than using a conventional lender.

  2. Lease with an option to buy. If you find a house you like, ask the seller if you can rent with an option to buy. Typically, the seller will take a portion of the monthly rent check and credit it toward the down payment. How much is the credit? Anywhere from 0 to 100 percent (but 33 to 50 percent is typical). You may have to put up a non-refundable option fee, but the amount of the fee is negotiable. You should consult with an attorney to protect your interests.

  3. Zero down payment loans. Until this year, the only way to get a zero down payment loan was to be a qualified veteran going through the Veterans Administration. You can still do that, though the VA has hiked the price of the truly zero down loan because too many folks were defaulting. Bank of America recently introduced a zero down product available to folks whose income falls within a certain range. However, this new zero down mortgage is only available in 23 states.

  4. Super-low down payment loans. If you can’t qualify for a VA or a Bank of America zero down payment loan, consider going with a loan that only requires a 3 percent down payment. These loans are available through the Federal Housing Administration (FHA) and conventional lenders.

  5. Government assistance. Various city and state housing agencies will from time to time offer assistance to government employees, or area residences in the form of ultra low-down payment loans, or even grants to put towards a down payment. Often, non-profit housing agencies participate in these programs, offering free first-time buyer education classes and financial counseling sessions.

To find these programs, contact your local municipal housing agency, and read the real estate section of your local newspaper. Local innovative programs for first-time buyers are often described in feature articles.

  1. Buy with a partner. If you have the financial wherewithal to buy a house but lack the cash, and you have a friend who has cash but may have a few credit problems, consider joining forces to purchase something. Before you do anything, be sure to sign a written partnership agreement specifying what each person is bringing to the table and what individual responsibilities will be for the new property.

  2. Second job. You or your spouse might consider taking on a short-term second job in order to boost your down payment fund. All the income from this second job would be designated for the down payment and closing costs on your first home.

April 13, 1998.