Personal finance:
How To Buy A Home With Little or No Money Down!

How To Buy A Home With Little or No Money Down!
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How To Buy A Home With Little or No Money Down!
One of the least understood tools of residential real estate financing is what I call "creative financing." How sad! I have found that knowledge of this non-traditional financing vehicle can afford many individuals the opportunity to own real estate either for investment purposes or for personal occupancy with little if any money down. In many cases, the buyer's credit rating is of no consideration to the transaction at hand and income stability is often times not the ingredient.

Unfortunately, the number of bankers or realtors who are versed in the specialized area of creative financing is quite limited. Nonetheless, opportunities do abound and, if you astute and - I might add - patient, you can find them.

Stats have shown that no other investment has made more money for a wider segment of the American people than the investment of owning real estate.

As America continues to "re-engineer" its corporations and keeps company continue to downsize, more and more opportunities will emerge for purchasing properties from what, I will term, distressed sellers. To the extent that you are knowledgeable of these techniques and the leveraging power of "Other People's Money", the bigger your prospects of financial reward in the real estate industry.

Simply stated, creative financing is any form of non-institutional financing provided primarily by the seller, builder or the investor. This type of financing is less rigid and more flexible than the traditional forms of financing offered by a bank or lending institution. Some models of this type of financing are lease-purchase agreements, land contracts (also referred to as "contract for deed" and "contract for sale"), owner-financed first mortgages, owner-held second mortgages, wrap-around mortgages and non-qualifying assumptions. As a general rule, the best chances for buying a home with a small amount (or no) cash are:
1. vacant houses
2. homes being sold by highly-motivated listing agents
3. sellers who don't need a large amount of cash from the sale

Also, many retirees will carry back a mortgage for extra retirement income. There are many advantages to creative financing, the most obvious being that it gives a potential buyer the most incentive to purchase the property. Many times the seller or builder will finance the property at rates and under terms that are far superior than those offered by banks. In addition, the seller, builder or investor is not required to use the same loan qualification system that institutional lenders use. In fact, the only qualification guideline that they are required to use is their own judgment! Therefore, the potential buyer does not have to "qualify" for financing using the traditional yardsticks of credit, employment, income and indebtedness. This is a major selling point.

In addition, the large closing costs typically charged by lenders can be eliminated. Realtor commissions are seldom involved in many of these sales transactions. Finally, the loan closing itself, which can normally take weeks or months can be accomplished in days. Having said this, let me begin by hashing out the various options available to purchase a home with little or no money down.

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