In an historically bad economy like this one, there is no shortage of motivated sellers, which means there is no shortage of opportunities for buyers to get creative with their financing terms.  In many cases, investors with little or no credit can arrange to purchase a home, with little or no money down, and with no new loans.  The nature of the slow market (the buyer’s market) is that it allows buyers to take advantage of opportunities while working to improve their credit and acquire funding for a down payment.  Here are a few ways to go about this.

      The first option is the lease-to-own route.  This is when a property owner rents the property to a tenant who intends to buy, but can’t afford to make the down payment or take out a new loan.  Every month, a portion of the rent is put towards a down payment on the home.  No loan, no detrimental credit impact, a place to live, and time to secure funding.  Generally, the contract will extend between 2 and 5 years, will require a small down payment on the home (3-7%), and will put anywhere from 10-50% of the rental payment towards the purchase of the home.  At the end of the contract, a mortgage loan (substantially reduced from the initial purchase price) can be obtained to cover the balance.  It’s pretty simple, but lease-to-own’s provide some incredible ownership opportunities to those who, in better economic times, could not hope to put together a competitive offer on the property.

      Another option which balances motivated sellers and small loans is what’s called a seller carry back mortgage.  This is basically when a seller agrees to act as the lender for a mortgage loan, allowing the buyer to complete the purchase and then repay the seller over the course of a few years.  It is very rare for a seller to agree to finance the entire purchase, but surprisingly common to find terms of partial seller carry back mortgages.  In these cases, the buyer takes a primary mortgage loan from the bank (one which is much smaller and easier to acquire than the loan for the entire purchase price), and a second mortgage directly from the seller.  This requires cultivating a pretty solid relationship with the seller, so bring your “A-game” when you follow leads—especially if you’re short on credit or cash.

      There are many opportunities to simply find good deals—houses listed and sold below market value.  Be it through foreclosure auctions, probate sales, short sales, or creative financing terms, anyone can buy right now.  After all, it’s called a buyer’s market for a reason.  Use your head, not your money, and you can find a path to home ownership that won’t leave you destitute and with crippled credit. 

Let us know what you think. J 

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