Buying a house without a loan sounds great, doesn't it? No monthly payments. No worries about losing the home to the bank. So is it possible to buy a home without a mortgage loan, even if you just have a regular job and no rich parents to foot the bill? It is.
Saving For A Home
Start saving for your future home purchase - that's an obvious first step. In the past home prices may have been rising faster than your savings, making this an unworkable plan. But at the moment (2009) prices are actually still falling, making it a great time to save for a future purchase.
You might think you don't have enough income to set aside money every month. Most likely there is a way, if you are serious about having a debt-free home someday. In fact, in some areas the cost of buying is still more than the cost of rent, so if you think you can buy with a loan, you can certainly rent and save the difference.
In Tucson, Arizona in 2005 (when we lived there), for example, renting a small house often cost $600 to $800 less than buying the same house. If you could buy, you also could rent and set aside the difference. That would have been a good plan, as it turns out, since those homes now sell for a lot less.
If rent is similar to the costs of buying where you are, you still have the option of renting a smaller, cheaper place. That temporary sacrifice will allow to set aside money for your future home. And if you are serious about this you'll find other places to cut your costs and so increase your savings.
Buying Your First House Without A Loan
It takes a long time to save enough money to buy a home for cash if you try to start out with your dream home. Even setting aside $800 per month like in the Tucson example, would mean at least fifteen years to have enough to buy a typical small house - and that's assuming some return on your money and prices staying the same.
Fortunately there's a quicker way if you're willing to plan well, shop smart and live modestly for a few years. The following example shows you the steps you might take to accomplish this.
1. Find the cheapest apartment around.
You might even consider renting a room to really cut your expenses. With other cost cutting, we'll suppose that this allows you to set aside about $550 per month. Live there for four years and you'll have about $28,000 (with interest) in the bank.
2. Buy a cheap mobile home on property.
Move to another city if necessary to find a place under $30,000. A mobile home on property appreciates in value, unlike in a park. You also won't have to pay lot rent. You want to buy at a truly low price, so take your time, and keep saving while you search.
3. Save more money.
It's cheap to maintain a mobile home, and you'll now have no rent nor payments. Even after accounting for property taxes and insurance you should be paying out less than what renting cost you. Because of this you can boost your savings from $550 per month to perhaps $700, or even $1,000 if you rent out a room for $300 per month - something I did easily in my mobile home when I was younger.
4. Move up to the next house.
You can sell this first home a few years later for decent profit because of appreciation and the fact that you bought wisely. That money along with your savings might get you a small home that needs some minor fixing up. If you take your time and buy cheap you immediately increase your assets, so you can more quickly move up to the next home.
5. Continue the process.
The secret here is to always rent or buy less than you can afford, so you are able to set aside money. You use that, along with smart shopping and good negotiating, to periodically move up to a better home until you have your "life home." This is how buying a house without a loan is possible.