Obtaining a home mortgage loan today is considerably more difficult than a few years ago. Unfortunately, too many people were approved for mortgage loans that weren't financially qualified to repay the debt. The end result is the massive amount of foreclosures sitting abandoned all across the country.
Today, borrowers seeking a home mortgage through traditional lenders must have nearly perfect credit, along with a strong history of paying debts on time and a solid work history. While this can be frustrating for people with less than perfect credit, alternative options exist for buying a home.
One common practice is known as seller carry back financing. Using this financing technique, sellers carry all or a portion of the sale price. Buyers enter into a contract with the seller which typically lasts between two and five years. This allows borrowers time to clear up negative credit or establish a credit history. At the end of the contract, borrowers can apply for a conventional home mortgage loan.
Another alternative is to enter into a rent-to-own agreement. Buyers reside in the home as rental property and a portion of the rent is contributed toward the purchase price. Most sellers require buyers to provide a down payment of 5- to 10-percent. Rent-to-own contracts generally last between two and three years and help borrowers establish a solid payment history.
Buyers who engage in seller carry back mortgages and rent-to-own agreements should consult with a real estate attorney prior to signing. Contracts should include legalese to cover both parties in the event of default. Monthly payments should be made by bank checks which can easily be verified if questions arise.
Home mortgage loans can be obtained through private lenders. Many real estate investors and investment groups offer hard money loans to borrowers who do not qualify for traditional lending. Hard money home mortgages are not cheap. Interest rates generally fall between 15- and 20-percent.
Additionally, most real estate investors require a 30- to 50-percent down payment. Private lender mortgage loans are not intended to last longer than two or three years; allowing borrowers to improve credit and refinance into a conventional loan.
The Federal Housing Administration (FHA) offers loans to borrowers unable to meet conventional home mortgage loan criteria. In order to secure FHA loans, borrowers must provide proof of income, source of down payment (gift, savings, inheritance, etc), and prove the real estate is properly valued. FHA lending limits vary by state and borrowers must work with an FHA-approved mortgage broker.
Last, but not least, the U.S. Department of Housing and Urban Development (HUD) offers homebuyer assistance programs to low-income buyers and individuals working in certain professions such as teachers, firefighters and police officers.
Although the housing market is in a slump and the economy still steeped in recession, the American Dream of homeownership hasn't gone away. Owning a home can be a rewarding and profitable experience as long as borrowers do not engage in risky behavior which could place their home at risk for foreclosure.
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Published on August 28, 2009 at 02:31 AM | Comments: 1