Real Estate Financing - Ten Ways
By Steve Gillman - 2005
Remember when real estate financing meant saving up enough
to put 20% down on a house, and then getting a mortgage loan
for the other 80%? Well, you can still do that, but there are
many other options now. Here are ten of them to get you thinking.
1. Gift programs. Builders in some states fund foundations
that give you a portion of the down payment, so you can get into
a home with as little as 3% down payment from your own pocket.
FHA and other lenders have so far approved of or allowed these
programs.
2. No-doc and low-doc loans. Meaning no or low documentation
requirements, you can find them through online banks. These are
especially useful for those with bad credit but 20% to 30% to
put down on a home. You don't even have to have a job.
3. FHA programs. The Farm Home Administration doesn't loan
the money, but guarantees your loan for the bank, so they can
loan up to 97% of the purchase price, depending on the particular
FHA program.
4. The VA loan program. If you've been in the armed services,
have a job, and can save two or three paychecks, you can probably
get a home with a VA loan.
5. Land contracts. Called "contract for sale" and other
names depending on the part of the country you are in, this just
means you make payments to the seller instead of a bank, and
get title to the property once you've paid in full. It's up to
you and the seller to negotiate the down payment amount, interest
rate, and the term of the loan.
6. Seller financing. Some banks will allow you to have only
5% into a home purchase, but will then only loan you 80%. The
seller can take back a second mortgage from you for the other
15%.
7. State housing programs. Most states have some sort of financing
help in the form of a loan-guarantee program or outright loans
for low-income buyers.
8. Loans from family and friends. It isn't charity for a brother
or a friend to lend you the money to buy a home. A 7% return
looks awfully good if their money is sitting in the bank at 2%.
9. Manufactured home loans. Some manufactured-home companies
are doing financing with 5% or less down for their buyers. They
must feel their money is secure, but then a good modular on a
piece of property is nothing like a mobile home on a rental lot.
10. Credit cards. This may seem risky, but you can use a low-interest
credit card to come up with the down payment, especially if you
can pay it off soon (with a coming tax refund, for example).
Banks may not allow this, but you could combine this with seller
financing.
Are there other ways to approach real estate financing? You
know it. This is just to get you thinking.
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