Since home prices are at historical highs, you may need some serious help coming up with the correct financing to buy a home. Surprisingly, help might be found right in front of you.
When it comes to home purchases, particularly first homes, there are some traditional ways to pursue the financing process. Since the down payment is usually the biggest issue, most people take a couple of approaches. First, they save like mad to get the money together, but it can take a long time. A secondary approach is to do some negotiating at the Bank of Mom and Dad. Depending on your family situation, this can be a great or horrible option! If neither of these approaches works, you might look to a more surprising source.
As the real estate market cools off, sellers are in a bind. The good old days of buyers knocking down their door at all hours are over. Now it is the buyer who has the leverage as home sales slow down to a trickle. Put in practical terms, home sellers are now highly motivated to work with buyers to make a sale happen. This means you!
If you are having problems coming up with the financing for a home, you should have a word with the seller. Most sellers are sitting on tons of equity these days, which means they have the ability to help you get into the home. How? Through seller financing.
Seller financing is exactly what it sounds like, to wit, the seller gives you a loan to help you purchase their home. Technically, the loan is a second mortgage. It works like this. Assume you get pre-approved to borrow $300,000 from a lender. You find a house you like for $335,000. You can’t afford it, right? Maybe not. In negotiating with the seller, you make an offer for say $320,000 and ask the seller to carry the $20,000 as a second. If the seller is motivated, and most are these days, they will be receptive to this. Once you agree on the final numbers, you will sign a second mortgage on the property at closing and make payments to the seller according to the agreement.
If the above scenario sounds unlikely, it is not. Sellers are motivated to move their properties and seller financing is a common way to get deals done. Don’t hesitate to address it with the seller as it may be the trick you need to get the deal done.
Dan Lewis is with Great Western Mortgage - providing
Southern California hard money loan services.
