Some of the most attractive metro areas in which to live are completely inaccessible to middle-class homeowners, a trend which is becoming more pronounced. Families paying over 30 percent of their incomes toward housing are considered “cost-burdened” by the U.S. Department of Housing and Urban Development (HUD). Furthermore, cities in which middle-class households pay over a third of their monthly income in rent are considered unaffordable. Some of the fastest-growing cities in the countr…
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Are you contemplating investing in real estate? But you do not have enough cash to do this. Here is a tip you may use as long as the property seller is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better wager is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and considering using this approach perhaps the owner would be happy to assist you! There are some variations that could be used depending on you and your vendor. Do they need the market price or are they just eager to get out of the monthly payments – perhaps facing foreclosure?
The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will need to be approved by the original lender to presume the mortgage. If you cannot get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make obligations while the property stays in the seller’s name.
You take over the first mortgage and get a second mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – 2 or 3 years. Rather than having the money sit down in a bank they can 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 draws to a close you ought to be able to refinance the cost, or you can sell. Unless you struck a genuine bad market the value of the house should have risen in that time.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are lots of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the land, so as long as they know they get their money back in the value of the land if you default, they don’t care what sort of money you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they can still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can see the complete picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you could still give them their asking price with a little versatility on their part.