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Explore Creative Financing Options for Your Next Home Purchase



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By : Fredrica Smith    99 or more times read
If you are one of the seemingly desperate home buyers, do not lose all hope. Banks may seem to be the most traditional and logical choice for borrowing money. However, if these financial institutions do not approve your application, what would be your next step? You can search for other outfits that offer financial assistance.

If you do not have the cash, your loan application in the bank was denied and you cannot afford to miss the chance to purchase a certain property, creative financing would be the answer to your problems. Some private investors and private loan agencies do not give as much gravity to checking out your credit score, income statement and other documents. Majority of banks prioritize your income and credit in reviewing your eligibility to become an able borrower.

There are many types of such financing options you can choose to embark on. The first of these is the seller financing. This comes in varied forms as well. But the main arrangement in this option is that the seller also serves as the principal financier of the deal. He functions as partly or wholly the lender for the transaction. You, as the buyer, will directly pay your dues to the seller. With this situation at hand, closing the deal can be easier as the middleman factor is eliminated. Its three variations include:

  1. Full loan for the purchase price – this is a short-term agreement but at the end of the term, you will owe a balloon payment for the home. However, the repayment plan duration depends upon the negotiation that would transpire between you and the seller. The ideal timeframe is from five to ten years. Within this period, you can then have savings to be later on allotted for the balloon amount.

  2. Rent-to-own or Lease-purchase – a portion of your monthly dues paid to the seller will be directed to completing the payment for the price of the home. The rental can endure from two to three years. One note about this, you have to put down a larger down payment as your initial deposit.

  3. Wrap around mortgage – in this set up, the seller would offer you the second mortgage on the home. This is commonly at a better interest rate. And a percentage of your payments will then serve as the funding for the seller to continue paying for the first mortgage.

Another option is to look for nothing-down payment homes. Federal government financial assistance programs such as VA and HUD loans enable you to get homes that do not require you to give a deposit. Also, these programs can guarantee your loans. Other states and local lending outfits provide assistance for providing home purchase loans.

You can also look into fixer upper homes as these properties can be your stepping stone to purchasing your dream home. Due to the poor condition of this type of property, it is sold at prices way below market values. All you have to do is to spend some cash for its repairs or renovations and then put it up for rental. As you accumulate some income from the property, you can use your profits for your next home purchase.

Other creative financing options are in forms of peer-to-peer lending, online mortgage applications and other private transactions. These generally involve investors, whether equipped with small or large scale assets, who are willing to fund loans, which would later on generate profits from interests. The main advantage in these private dealings is that there are minimum requirements for qualifying in any amount of loan.

Like anything that is seemingly perfect, creative financing is not. Before you enter any of the non-traditional borrowing options, you must be very cautious. You have to be prepared in the arena of home buying so that you can easily detect if there are any mishaps looming to happen. If you are in that position, you can then easily back out or have a breeze in troubleshooting how to iron things out. Thus, in the end, the purchase deal will smoothly flow according to your plan.

Most people who are in dire need to have cash on hand think that the only way you could borrow a handsome amount of money is through the banks. But by exploring these creative financing options, you can exercise your right to have your own property.
The Real estate market can be an enjoyable, satisfying and lucrative experience for you. Whether you are a homeowner, a buyer, a landlord or simply a real estate enthusiast, get to know more about the latest in the real estate market now. Read more about it here: Fountain Hills, AZ Inexpensive Real Estate, Troon Village Scenic Homes for Sale and Cheap Homes for Sale in Scottsdale Ranch.

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