Creative Real Estate Financing Methods

Get ready ,this is the age of creative real estate financing. Do you remember when financing meant you saved up enough money to put 20% down on a house, and then got a mortgage loan for the other 80%? You can still do that, but there are many more options now. Here is a list of ten of them.

1. Second mortgage loans from sellers. Many banks will allow you to have as little as 5% into a home purchase, but will then only loan you 80%. The seller can take payments on a second mortgage from you for the other 15%.

2. Manufacturer loans. Manufactured-home companies are arranging financing with 5% or less down for their buyers. This can be as low as $2,500 down if you already have property to put the home on.

3. Housing programs through State governments . Many states have some sort of financing help in the form of a loan-guarantee program or outright loans for buyers with low incomes.

4. VA mortgage loans. If you have been in the armed services, have a decent job, and can save two or three paychecks, you can probably get a home with a VA loan.

5. Contract for sale. Called a “land contract” and other names depending on the part of the country you are living in, this means that you make payments to the seller instead of the bank. It’s up to you and the seller to negotiate downpayment amount, interest rate, and the terms of the loan.

6. Builders gifting programs. In some parts of the country, builders fund foundations that give you a part of the downpayment, so you can get into a home with as little as 3% downpayment from your own pocket. FHA and other lenders have approved this so far.

7. FHA mortgage loans. The Farm Home Administration doesn’t actually loan you the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, taking into account the particular FHA program.

8. Loans from friends and family. It may not be from charity that a brother or a friend lends you money to buy a home. That 7% return might look really good if their money is sitting in the bank at 2%.

9. Bank no-doc loans. “No-doc” and “low-doc” loans, means no or low documentation requirements are back, and you can find them through online banks and local mortage companies. They are for those of you with bad credit, but with 20% to 30% to put down on a home. You don’t even need to be employed.

10. Credit card. A risky way, but if you have a low-interest credit card, you can use it to pay the downpayment, especially if you can pay it off quicky, perhaps with a coming tax refund. The banks generally won’t allow this, but it is possible if you combine this with seller financing.

So are there more ways to approach real estate financing? You bet there are. These are just some ways to buy your own home. When you start investing, you can use other techniques for really creative real estate financing.

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