New Homeowners or Future Investors!
With the foreclosure market continuing to grow, there are many opportunities available for people to find the ideal home or rental property at affordable prices. Even after they pay to have repairs and updates done these properties are very affordable.
However, prior to just running out and putting a contract on that house simply due to the price being dirt cheap, you need to get a few things prepared prior to signing on the dotted line. This article will focus on detailing the various financing options that are available, including options for those with less than perfect credit situations and how to protect yourself from being taken advantage of and losing what you're working so hard to obtain.
Brief Explanation:
We will be discussing conventional mortgages, home equity, lines of credit, hard money lenders and carry back options. There are pro’s and cons to each of these types of financing and different methods of getting qualified for them. This can also be based on what condition your credit history and credit scores are in.
Financing Options:
Special Note: Prior to searching, decide if your looking for a personal residence, rental property for income or a fixer flipper.
The following are the largest majority of financing options available to those who are serious about following through with their dreams and ambitions.
Conventional Mortgages; these are what most people think of when buying a home. These are usually though banks, credit unions and mortgage financial institutions. They usually require moderate to good credit histories and scores from the major credit bureaus. They are usually less flexible than some other options available. And when acquiring a foreclosure, they are less likely to finance a property that they are currently trying to get off their books.
Home Equity Loans; these loans are typically easier to obtain providing you have sufficient equity in your home and fairly good credit. You can use the equity in your home to get the amount of money needed to pay cash for the property that you are interested in purchasing. Although, I recommend you use caution when using this option, after all, you are putting up your personal home as collateral and if things go wrong, you could lose your home.
Lines of Credit; these also are usually through banks, credit unions, mortgage financial institutions and some hard money lenders. These typically require fair to good credit to qualify for and some form of collateral besides the property you want to buy and fix up. These work good for certain situations and certain people, but not necessarily for everyone.
Hard Money Lenders; also referred to as High Risk Lenders, these are usually private investors looking for a high return on their investment. Now be very careful here, I know the temptation to just run with a hard money lender seems like the easy and hassle free way to go. They are less strict on their credit scores and easier to get approved for, without the hassles. Do your homework and decide if they are giving you a good deal, so-so deal, great deal or really bad deal. Some will finance buying and rehabbing cost while others will only finance one or the other but not both. Most will require a Deed-In-Lieu of Foreclosure Agreement. This is not a bad deal, just be absolutely sure you can meet their terms or lose it all, period. Seriously, do you blame them, it's their money at stake, especially if you have bad credit scores and history.
Carry Backs; this usually requires the least amount of credit, many times your credit is not even a factor in this transaction. Using this method of financing involves you asking the homeowner to carry-back the mortgage. Basically you are requesting them to be the lender. You can ask them to pay closing or split it. You can offer to pay-off the entire amount over a specific period of time or offer to make interest only payments during a specified time frame with the balance due at the end. This could be so that your able to save up enough to pay it off, sell it or refinance at the end through a conventional lender or hard money lender.
Lease-to-own; this method is becoming more popular and also has lower credit score requirements than banks, credit unions and financial mortgage lenders. Usually, they have a set down payment amount and monthly payment schedules set up. Some offer half of your monthly payment as a down payment of the house when refinancing. Each has their own rules they have determined, so find the one that works for you. There are different specified time frames that each establishes that they are willing to finance the property some will allow you a year to seek refinancing, others will carry the loan for the duration of time required to pay it of.
To sum up the various financing
options, simply get
creative. You may decide one way works best for your situation or you
may get creative and combine all of them. Either way, do your research
and READ the different terms of each contract. If the house is cheap
enough, can you borrow from family and friends? Maybe you have a new
car
that is paid off and you can get a title loan. Have owner do a carry
back
and a hard money lender finance the construction cost. Maybe a down
payment and a lease to own property is best for you because you want
something that’s move in ready, but can not qualify for a loan.
Get creative, do your research, read the small print and be
thorough. Don’t get lazy and not finish the project or simply
assume
you can do things that obviously
you can not do yourself.
Special Note:
These are strictly recommendations that consumers should consider when considering investing in foreclosure and fixer upper properties.It is the sole responsibility of the homeowner and investor to decide how to proceed with a process that meets their own specific needs.
Author Bio:
This article was written by Walter Sanderson, founder of this website, STL Home Rehabbers. He has more than 15 years experience in rehabbing and remodeling homes. For more information about him, you can check out http://waltersanderson.stlhomerehabbers.com/.
Article Source: http://www.stlhomerehabbers.com/
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