If your friends have recently purchased a home, then the odds are good you might start thinking about doing the same. If they’re posting about it on social media, however, you’re probably going to take some action. According to a new survey from Bank of America, about a third of Millennials say that posts on social media about homeownership make them think, “If they can buy, why can’t I?” About a quarter of the 2,000 respondents said that they are starting to fear missing out on an …
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Are you thinking of investing in real estate? However, you do not have enough money to do so. In this article is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in offering it, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you are currently renting and considering using this approach perhaps the owner would be happy to help you out! There are some variations that may be used depending on you and your vendor. Do they want the market price or are they just desperate to get out from the monthly payments – perhaps facing foreclosure?
The simplest method is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will need to be approved by the initial lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and create a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money sit down in a bank they could be getting a high interest over two or three years with the remainder due in full at the end of the term.
When the term ceases you need to be able to refinance the cost, or perhaps you can sell. Unless you strike an actual bad market the value of the home should have risen by then.
A lot of mortgage lenders merely need to make a great investment. While your local bank may still be lacking confidence there are a lot of financial lenders that would want to make a deal. Financiers like real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of income you make. Complete the deal with a 2nd mortgage created with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can see the complete picture. It is better that seller and buyer may work hand in hand. In the event that they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.