Mortgage rates are near all-time lows, and your apartment seems smaller with each passing day. You've got a spotty employment record, or perhaps have had some credit issues in the past. How can you qualify for home financing? Finding homes listed with seller financing is one solution. Seller financing means that the owner/seller of the home you're buying gives you a mortgage on the property being sold. You make monthly payments to the seller instead of a financial institution or mortgage lender. There are risks in seller financing for both home sellers and buyers. Here's what you need to know.
Private home loans: Preventing problems with seller financing
Obtain your credit reports and know how much you can "bring to the table" when making an offer: Providing a significant down payment reduces the seller/lender's risk, and can compel sellers to accept your purchase offer over others. Offer as much cash down as you can afford. Consult a HUD-approved housing counselor to learn about the actual costs of buying and owning a home and determine how much you can afford to spend.
- Enlist the help of a real estate professional. Discuss your plan to buy a home using seller financing. Good real estate agents thoroughly understand state laws governing real estate transactions. Yours should help you negotiate your purchase, open escrow with a title company or attorney, and help you with other services like appraisals and inspections.
- Buy with your head, not your heart. You've found your ideal home, and the seller is willing to finance you and offers a low mortgage rate. But you're not finished! Don't ever buy a home without an appraisal and inspections. Seller financing is no bargain if you overpay for the home.
- Seek legal advice. Mortgage companies have to abide by a lot of consumer protection laws that private sellers don't. Some scammers even make a career of selling and re-selling the same property over and over. Hire a real estate attorney to review purchase and financing documents to make sure you're getting a fair deal and that the agreements meet your state's requirements. Some states require attorneys for conducting real estate closings; your real estate broker or agent can advise you about this. requirements.
Mortgage lenders and brokers can also help you find financing your home purchase using traditional home financing lenders. State and community housing programs can help first-time buyers find low cost mortgage loans, down payment assistance and mortgage credit certificates. Consider several home financing options--traditional home loans, housing finance programs and seller financing.