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Ask The Home Seller For Help With Your Financing
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Ask The Home Seller For Help With Your Financing
Finding enough cash to make a solid down payment on the home of your dreams is often a difficult task. With home prices at all time highs, coming up with 10 or 20 percent equates to a large amount of money. Well, the seller might just help you if you ask.
Ask The Home Seller For Help With Your Financing
As you know, we have just finished up one of the hottest real estate markets every recorded. With massive appreciation rates and incredibly low interest rates on loans, it was a seller market through and through. Alas, those heady days are now over and done with. For many a buyer, this presents some interesting financing options.
During the sellers market, homes were being snatched by buyers before they were even appearing in the MLS listings. Sellers could sit back and come up with an outrageous price and the offers would practically flood through the door. Any buyer that didn't show up with financing arranged was laughed out the door. The seller had all the leverage, so why mess about?
With the current market, sellers know longer have the leverage. Now, they are having problems getting interest in their homes, much less offers. The market is flooded with too many homes. On top of this, interest rates have risen which reduces the potential pool of buyers. In simple terms, the tide has turned. A seller that might have laughed one year ago if you asked them to help with financing will probably be listening closely this year.
What is seller financing? It is simply a situation where the seller agrees to take part of the purchase price as a second mortgage on the property. Let's say you want to buy a home for $300,000. You have 10 percent or $30,000 for the deposit. The lender, however, will only loan you 80 percent of the value of the home. You need to come up with another 10 percent. In such a situation, the seller will agree to finance you by taking a second on the home for the 10 percent. The repayment terms are up to negotiation, but this is how it happens in a nutshell.
At one point in time, seller financing was views as a fairly aggressive, rare form of financing. These days, it is very common given the high prices of homes on the market. If you are short on the deposit, make sure to address the issue with the seller of the home.
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Self Employed Mortgage Issue
The economy of the United States is undoubtedly and indisputably based on the small business. That being said, it is rather amazing that financing for self-employed people is such a problem.
Self Employed Mortgage Issue - Lots of Assets, Little Income
There is a certain beauty to the entrepreneurial spirit. You have the pride of ownership in running your own business. You get to make the key decisions. You get to decide the vision for the business. Of course, you have to pay the bills and deal with down years, but it is really a small price to pay. When it comes to financing, however, you may feel like you are being sacrificed to the finance gods.
In this case, we are talking about being self-employed and applying for a home loan. Despite the fact you and me are part of a group of millions of self-employed individuals, lenders do not seem to know what to do with us. The problem is we do not fit in nice little squares. Owning a business is a highly fluid situation, but most lenders consider fluidity a bad thing and are uncomfortable with it. In an effort to deal with us, they usually want to see every bit of financial information we have for the last three years. If you are self-employed, you know this can lead to problems.
It is the rare day that a self-employed person makes a consistent amount of money. Each year is different. 2004 may have been great, while 2005 was not so. This variable income situation gives mortgage lenders major headaches. They want to forecast whether you can afford the loan you are seeking. A big part of that forecast is how much they think you will make in future years and how likely it is you will make that amount. If you had a down income year recently, they will often reject your loan.
So, is there anything you can do in this situation? Yes and no. If you have nominal assets, there is not much advice I can offer you. No assets and low income is a bad combination when it comes to seeking financing. On the other hand, significant assets can provide a solution.
If you have been putting money into the stock market or retirement vehicles or art or whatever, there is a potential solution to your low income problem. The answer is to sell some of the assets off and make a bigger down payment. The exact amount is entirely dependent upon how much the lender requires before they will give you the loan. They will usually tell you how much you can borrow with your income figures. You need to come up with the rest as the down payment.
Being self employed is great except for when it is not. Applying for a mortgage can be one of these negative situations. If you get in a bind, consider cranking up your down payment to see if it does the trick. While you may not want to sell that choice stock, keep in mind you can sleep in a house.
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