According to Freddie Mac’s first-quarter home lending data, nearly half of all borrowers who took out home mortgages during the first three months of this year were first-time homebuyers. Those borrowers’ median age is 32, according to the National Association of Realtors (NAR). Freddie Mac chief economist Sam Khater called the influx of new buyers a “millennial -driven rise,” crediting “a strong economy…along with the appetite of the financial market to invest in mortgages.”
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Are you contemplating investing in real estate? However, you don’t have enough cash to do this. Here is a tip you can use as long as the property seller is willing to negotiate along.
To be fair, not all sellers will be willing (or even understand) the concept outlined. Your best guess is to find a land that the owner has great desire for selling, whether because of moving, divorce, or frustration with the people renting the place.
Actually, if you maybe currently renting and thinking about using this approach perhaps the owner would be happy to assist you! There are a few variations that could be used depending upon you and your seller. Do they want the market price or are they just eager to get out from the monthly payments – maybe facing foreclosure?
The simplest way is to consider taking over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may as well try a ‘subject to’ assumption where you merely make payments while the property stays in the seller’s name.
You take over the original mortgage and make a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – 2 or 3 years. Rather than having the money stay in a bank they could be collecting a high interest over 2 or 3 years with the remainder due in full at the end of the investment term.
When the term draws to a close you should be able to refinance the cost, or else you could sell. Unless you strike an actual bad market the value of the property should have risen in that time.
A lot of mortgage lenders merely want to make a great investment. While your local bank could still shy away there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly 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 revenue you make. Complete the deal with a second mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage in the proceeds.
Now you can observe the whole picture. It is better that seller and buyer can 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.