House Sale Online

Home ownership preparation involves a number of details that require a potential buyer’s attention. Sometimes a poor credit history, for example, or a less-than-ideal income means you can’t qualify for a standard mortgage, being perceived as risks to foreclosure.

This more cautious scrutiny is often invoked for first-time home buyers who are stretched thin in a market still saturated with overblown house prices.

If you’re still in the process of establishing or repairing your credit and growing your career, keep reading for some mortgage options that are available to you.

Seller Financing

Seller financing or “land contract” selling is probably the oldest method of buying a home with a small down payment. Basically, in addition to getting a mortgage from your lending institution, you also get a smaller second mortgage from the seller.

For example, let’s say you get a 70 percent loan from the bank, and the seller lends you an additional 25 percent. You can now get the property for as little as 5 percent down, plus the closing costs. You also don’t have to qualify for the second mortgage because it’s coming from the seller.

In today’s market with extremely motivated sellers, this is an option you’re going to see a lot. However, many sellers are still wary because of the potential risk involved or because they need the cash and equity to purchase another home.

Most sellers who are willing to “carry back some paper” are looking for a relatively responsible buyer capable of putting 10 percent of the loan amount down.

Low Documentation Loans or Express Loans

The low-doc loans are popular with people who want to minimize the amount of paperwork and details they hand over to a lender. Basically, in exchange for limiting the amount of personal information and credit history you give to a lender, you provide a large down payment.

Typically, these down payments start at 25 percent or more. The lender then waives most of their paperwork involving income verification, reserve checking and credit standing.

Family Financing

Over 50 percent of first-time home buyers get more than a quarter of their down payment from family gifts or loans. Essentially, a family member may agree to lend you a portion of the purchase price.

To keep healthy family relationships, it’s prudent to keep everything as business-like as possible, hiring a lawyer to draft up the loan papers. You can offer the property as security.

Family members may offer low-interest or no-interest loans, but you may want to consult your tax accountant before you go down the no-interest path. Basically, if the IRS sees a mortgage that’s below the standard interest rate, they may impute the interest and tax the lender anyway.