Creative Financing For Real Estate

Some Sellers Can Finance a Land Contract

One form of creative financing that can be beneficial for buyer and seller is the land contract. This is often an option for owners of a second home or anyone who owns their real estate free and clear. In this instance, the seller is carrying the loan, and payments are made to the seller. Usually, a down payment is made and equal monthly installments are paid until the property is paid for or until a balloon payment is required. Sometimes a balloon payment or a lump sum of money is due at a specified time. Sometimes a buyer will have enough equity in the home at that time to get conventional financing for the balloon payment. A buyer may want to protect himself by having the land contract recorded. When the payments are complete, the seller delivers the title.

Balloon Payment Mortgage

If you are only going to own the property for five years or less, you might want to go for a 30-year mortgage with a balloon payment at the end of five or seven years. These loans often offer a lower interest rate amortized for 30 years, but only paying interest for the first term. This makes your overall monthly payment lower. When the balloon payment comes due, you need to pay the remaining amount of the loan. If you haven't sold the property by this time, you can often convert it to a conventional loan. It will probably be at an interest rate considerably higher than if you had gotten a normal fixed-rate mortgage at the time of purchase.

Lease Option Financing

If the seller will not go down in price, they may be willing to carry the loan with a low interest rate. They will be earning more that way if they had received the cash in hand. It is an advantage for the buyer who may have trouble getting a conventional loan. The lease option contract allows the buyer locks in a future purchase price. The seller has enough income to carry their old mortgage and still has enough down payment for a new home without receiving an all-cash payment.

Real Estate Agent Takes Note for Commission

If the agent's term of contract is nearly up, the seller is likely to go with another broker or take the house off of the market, and the current broker won't get anything. The agent may be willing to take a note on his commission. He takes the risk of not getting paid, but in this instance he wasn't likely to be in the first place.

Home ownership is available to those working to figure out the best financing for their situation.

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