How to Find Cheap Houses: 6 Ways to Find a Home for Under $200,000

Buying a home doesn’t have to mean taking on a massive mortgage.

Sure, prices for homes are skyrocketing in many areas, but there are still some homes out there to be had for $200,000 or less — especially if you’re willing to renovate or live outside of the biggest cities.

For this guide on how to find cheap houses, we asked people who have bought homes for $200,000 or less recently how they did it.

How to find cheap houses for under $200,000

Some people can find great deals on clothes or electronics. Others have a knack for saving thousands on a new car. And some have the gift of finding the perfect home at the perfect price.

How do they do it? It may look effortless — and sometimes there is some luck involved — but anyone can find an affordable home with a little creativity.

Note, however, that “cheap” refers to the price of the house, not the quality. Despite the hair-raising headlines, home prices are still moderate in many parts of the country. It’s possible to find a property that’s “cheap” price-wise but is well-built, comfortable, and a good place to make a home.

Here are six strategies for finding homes under $200,000.

Tip #1: House hunt in lower-cost states

Working remotely has given people the freedom to live wherever they want. If you’re a remote worker, you could find an affordable house by moving to a state where houses are less expensive.

Most homes that cost $200,000 or less can be found in areas without large employment bases, says Jonathan de Arajo, a licensed real estate broker in Lexington, Massachusetts.

“If your job is remote, and you don't have to be within a good commuting distance of a major metropolitan area, you can likely find yourself a decent home for less than $200k,” he says.

So where should you move to find cheap houses?

The National Association of Realtors has a map showing median home prices by county. The most recent prices come from mid-2021, which means prices have risen. But you can still use the map to find places with below-average housing costs.

Related reading: The Keys to Buying A House With Low Income

Here are the 12 states that had the cheapest median home prices in 2021:

Home price is a big factor in deciding where to live, but it’s not the only one. So wherever you choose to put down roots, make sure it’s a place that you’re excited about moving to.

If you’re not familiar with an area, be sure to visit before making an offer on a home. Even though a commute may not be a concern, you want to make sure the area suits your lifestyle needs.

If you’re a remote worker, make sure the home has access to steady, reliable internet. And find out what types of amenities are in the area, how far you’ll be from a grocery store, and the quality of the schools and local community resources and events.

Consider, too, proximity to family and friends. Moving to a new state – especially one with a lower cost of living – can be a great decision. Reduced financial pressure can improve your overall well-being, as money worries are a key stressor in Americans’ lives.

But moving far from loved ones has its trade-offs. Will you need a home that has an extra bedroom or guest suite to accommodate visitors? How far is your new town from an airport that friends and family can fly into? These aren’t necessarily deal-breakers for a move. It just helps to see the whole picture, rather than making a decision solely based on home price.

Related reading: 5 Ways to Decide If A Neighborhood Is Right For You

Tip #2: Move out of bigger cities

Moving to a different state to find cheap houses won’t work for everyone. But even when you need to stay in the same general area, you can use geography to your advantage.

Neighborhoods on the outskirts of major cities tend to have lower-priced homes compared to the trendiest in-town neighborhoods. Even better deals can be found in smaller towns, known as bedroom communities, which could be an hour’s drive or more from larger cities.

Someone who works in Houston, for example, can find a great deal on a 3- or 4-bedroom home in the towns of Katy or Cypress, says real estate investor Corey Tyner. Likewise, a shopper in the St. Louis area can find better deals in Kirkwood or Webster Grove, west of downtown.

There’s a bonus to this strategy: In the suburbs, you’re more likely to qualify for a USDA* mortgage which would mean you could buy with 0% down. USDA mortgages work in qualifying rural and some suburban areas for buyers who earn 115% or less of their area’s median income.

If you’re a veteran or active duty servicemember, you can buy anywhere with no down payment**, depending on your eligibility, thanks to the VA home loan program.

Tip #3: Look for smaller homes

With any product, smaller and more basic models cost less than their larger, higher-end counterparts. This is true for homes, too.

Within the context of location, which sets the parameters for home prices, the size of the home affects its price.

To buy a home for $200,000 or less in a higher-priced market, you may need to shop for condos or townhomes, says Jonathan Faccone, a real estate investor and developer in Bridgewater, New Jersey.

“This can be a much more affordable route while still enjoying the comforts of a safe and charming location with good proximity to jobs and amenities,” he said.

Even if you’re ready to buy a single-family home with a yard, searching for 1,000- or 1,200-square-foot homes should yield more affordable options than looking for 2,000-square-foot homes. Unless you’re looking at fixer-uppers, that is. You may be able to find an older home with ample square footage for less than a smaller home if you’re willing to put in the work to fix it up. More on that below.

Related reading: How To Find the Right Home: A 3-Step Guide

Tip #4: Consider fixer-uppers

What if you can’t move to another state, don’t want to move to another city or neighborhood, and can’t make do with a smaller home? What then?

Well, to find a larger home for $200,000 or less in a hot housing market, you’ll have to compromise in some other area. For many homebuyers trying to find cheap houses, that means buying a fixer-upper, says Jenna Casillo, a real estate agent in Buffalo, New York.

“Buyers should expect to do some work before moving in for the majority of these homes,” she says.

Real estate investor Billy Daniel of Russellville, Ark., agrees. But he said “fixer-upper” doesn’t have to mean “unsafe” or “unlivable.”

“Last year we bought a house with a long-time leak from the water heater that had rotted the flooring around the utility room,” he says. “The sellers wanted out so we bought it and the repairs cost around $2,500 (including a new water heater). Other than that the house was in great condition.

“Don't let the condition of the house in the ad deter you from looking,” he says. “Something that needs repair may actually only need a little touch-up.”

But don’t rule out homes that need major renovations. You can often finance the cost of big repairs along with the purchase. You might not even need a big down payment.

Here are some renovation loan programs to consider:

• Fannie Mae HomeStyle
• Freddie Mac CHOICERenovation
• FHA 203(k) loan
• USDA renovation loans
• VA renovation loans

A $50,000 or even $100,000 renovation might not be out of reach with these programs. You can take a house from zero to hero and often reap the benefits of quick appreciation.

Tip #5: Be the first in line 

If other homebuyers don’t know a home is for sale yet, you might be able to buy the home at a reduced price, especially if the owner is motivated to sell.

This can happen when the owner has inherited a home and wants to sell it immediately. It’s also common for homeowners who have fallen behind on their payments to sell quickly before the bank starts foreclosure proceedings.

So, where do you find these sellers?

“My suggestion would be to search any FSBO (For Sale By Owner) listing website such as Craigslist, Facebook, and Zillow,” says Jeffery Shipwash who buys and sells homes in Knoxville, Tenn.

“Look for target description words such as ‘as-is,’ ‘need to sell,’ or ‘moving for a new job,’” he suggests.

“You can also reach out and build relationships with the top producing Realtors in your area,” he adds. “Although you ideally want to target off-market properties, big producing agents can notify you immediately if they have a home that will be available soon. This will give you the opportunity to make an early bid and eliminate competition. Making relationships is key.”

Tip #6: Buy a distressed or foreclosure property

Another way to find cheap houses is to keep an eye on distressed and foreclosed properties.

“Homes in foreclosure or other kinds of financial limbo (known as distressed properties) are often available for below-market prices,” says Martin Orefice, who helps clients find rent-to-own homes.

“In most cases, sellers are legally required to make a public notice when a home enters foreclosure,” Orefice says. “By checking your local property records, you can target these properties and the deals that come with them.”

This includes homes classified as real estate owned, or REO, homes. REO homes have already gone through foreclosure but didn’t sell. They’re owned by mortgage lenders or investors, who may be eager to sell.

REO homes that were originally financed with FHA loans become HUD homes. HUD Homes can offer great deals to bargain home shoppers. Be ready to make some repairs and updates to your new home. HUD Homes are sold at extremely low prices, but only if they’re worth $25,000 or less. That means you can expect to invest significant money in renovating the property.

Keep in mind, though, that you’ll have fierce competition when going after any distressed sale. Typically, investors armed with cash scoop up the best deals. Still, it’s worth looking into these opportunities. You might get lucky.

Many teachers and other public servants can buy homes at half price through the Good Neighbor Next Door program, though the properties must be in qualifying revitalization areas and you must agree to live in the home for at least 36 months.

Related reading: Top 12 Low and No Down Payment Mortgages for 2022

Benefits of buying a home for under $200,000

Everybody loves a great deal, but finding a cheap house can pay off for years, or even decades, into the future.

The ongoing benefits of buying a home for under $200,000 include:

• Lower mortgage payments: Borrowing less means smaller mortgage payments each month
• Lower closing costs: Some closing costs, such as the loan origination fee, are charged as a percentage of your loan amount. Smaller loans can lower upfront costs
• A smaller down payment: It’s great when you can buy with no down payment, but the next best thing is a low down payment. The smaller your loan amount, the less money you’ll need for a down payment. (And if you need help making your down payment, check out our guide to down payment assistance programs)
• Lower mortgage insurance premiums: Mortgage insurance charges, if applicable to your loan, are based on your loan amount, so smaller loans require smaller premiums. That’s potentially less money upfront and less paid in annual mortgage insurance fees each year

On top of these long-term savings, you may also find it’s easier to qualify for a smaller loan since lenders compare your debts to your income to make sure you can afford your new mortgage payment.

The bottom line

It’s easy to get overwhelmed by all of the headlines about housing prices right now. But there are still ways to get an affordable home that you will love and which will benefit you for years to come.

Putting in the legwork to find cheap houses now can lead to decades of benefits later on.

Key Takeaways:

• Despite the headlines, there are still many places in the U.S. where you can buy a home for under $200,000
• Looking for homes in cheaper states or outside major cities is one way to find affordable homes
• A fixer-upper can be a great option for finding an affordable home, especially in costly markets

*USDA Guaranteed Rural Housing loans subject to USDA-specific requirements and applicable state income and property limits. Fairway is not affiliated with any government agencies. These materials are not from USDA or RD and were not approved by USDA or RD or any other government agency. **A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits.