How to Buy a Cheap House

Wondering how to buy a cheap house in today’s tight real estate market?

A lower mortgage payment, lower property taxes, and lower insurance premiums all help you put more money elsewhere in your budget, or toward savings and investments. The less you spend on housing, the more you can put toward true investments to help you build wealth faster.

Of course, a “cheap” house varies based on the local housing market. In Cleveland, a cheap house might mean paying $70,000 instead of $100,000. In San Francisco, any home under a million dollars might count as cheap compared to the median home price of $1,242,637. 

Either way, the same principles apply to trying to score a bargain on your next home.

Ways to Buy a Cheap House

As you kick off your house hunt, try these tactics to buy a house for cheap.

Start with Market Research

If you don’t know the local real estate market, you can’t tell what counts as a cheap house. You might think you’re scoring a bargain, only to overpay for the house. 

Start by hopping on Zillow or Redfin and filtering by recently sold homes in your target market. The more recent the sale, the better the reflection of the current market value. Drill down into the exact neighborhood where you want to live, the exact property type, the exact size, and so forth. 

Once you know what local homes should sell for, you can start distinguishing between bargains and ripoffs.

Explore Financing Before House Hunting

You need a pre-approval letter from a mortgage lender before you can make offers. That aside, some types of subsidized loans are only available in certain markets, which might determine where you look. 

For example, USDA loans can come with below-market interest rates and a 0% down payment. But they’re only available in certain rural districts. 

By reviewing financing options first, you might find subsidized or specialty loans that boost the affordability of some homes over others. Start by reviewing conventional mortgage loan options. 

As a final thought, you may be able to negotiate owner financing with the seller for greater flexibility, lower interest rates, or a lower down payment.

Learn How to Negotiate a Home Purchase

You can and should learn how to negotiate the purchase price lower, to buy a house for cheap. But negotiations don’t end with the price.

As touched on above, you can negotiate for seller financing, which could improve a home’s affordability even if the purchase price is average. You can also negotiate for a seller concession to cover your purchase price. Most bank loans allow the seller to provide you with up to 6% of the purchase price as a seller concession. 

Look for motivated sellers likely to be more open to negotiating. Start by looking at homes that have sat on the market for over 60 days without selling. Sellers sometimes start getting desperate for offers — even lowball offers. If practical, house hunt in the off-season. Far fewer homes sell in the winter, boosting the odds of finding a motivated seller. In fact, Attom Data Solutions found that homes sell for 10% more in the spring and summer months than the winter, making the colder months an ideal time to buy a house for cheap.

Buy a Fixer-Upper

Fixer-uppers rank among the cheapest ways to buy a house. 

Homes that “need some TLC” sell for far less than move-in-ready homes, even after accounting for the repair costs. Try searching the MLS for keywords like “TLC” or “handyman special,” “repairs,” or “cosmetic.” 

You can also look up HUD homes that were foreclosed on, as most sell for bargain prices. 

Watch out for homes with structural or mechanical problems however. They can often cost far more to fix than buyers initially realize, even after bringing in a home inspector or a contractor to take a look. Stick with cosmetic issues and leave the major problems for professional real estate investors. And yes, you can finance the cost of repairs with your mortgage. Check out HUD’s 203(k) loan program to buy a home that needs cosmetic updates.

House Hack

Anyone exploring how to buy a cheap house should start by understanding house hacking. 

House hacking involves using your home to generate revenue, ideally enough to completely cover the cost of your mortgage payment and periodic repairs. In the classic house hacking strategy, you buy a small multifamily with up to four units, move into one, and rent out the other(s). Conventional mortgage loans allow properties with up to four units, so you can use a traditional mortgage. 

Alternatively, you can buy a home with an accessory dwelling unit and rent that out. Or you can rent out bedrooms to housemates, or rent out storage space, or parking spaces for cars, RVs, even boats. Get creative with house hacking to live for free: the cheapest way to buy a house!

Look for Off-Market Properties

By definition, properties listed on the MLS are open to the market at large, and sell for “market pricing.” 

So if you want to buy a house for cheap, stop looking on the public market for homes. 

Look for off-market properties listed on platforms like Craigslist or Facebook Marketplace. Ask around your friends, family members, neighbors, and colleagues to see if any of them know someone who’s thinking about selling. 

Send letters to the owners of abandoned properties in your target neighborhood. Look up local real estate auctions. Again, the more creative you get, the better the bargain you’re likely to score.

Final Thoughts

You don’t need to be a professional real estate investor to buy a house for cheap. But you do need to think outside the box. 

Look for motivated sellers to negotiate hard with, look for house hacking opportunities, look for fixer-uppers. Research ways to find off-market properties that don’t require setting up massive direct mail campaigns. 

Most of all, stay patient and flexible. If you must buy a house within the next 60 days, and insist on a specific type of house on a specific street, you’ll have a hard time finding a bargain.