Refinancing mortgage with bad credit
You might be surprised to know that you can get a mortgage refinance even if you have a poor credit history. Even though banks have tightened up their lending standards considerably, you can still attempt to refinance mortgage with bad credit. There are many lenders such as specialty bad credit mortgage brokers and bad credit mortgage lenders that offer you loans under such circumstances. Though these loans carry a higher interest rate and have higher closing fees, it can help you to improve your credit score in the long run.
Tips to help you get a bad credit mortgage refinance loan
Make sure that you follow these steps while you are looking to get mortgage refinance with bad credit:
• When you attempt to refinance mortgage with bad credit, it is better to apply to only those companies who offer mortgages to borrowers with poor credit score. So, find out those companies who offer assistance to individuals with financial difficulty.
• Always does your research before you apply for refinance. Shop around extensively to get the best deal. Make sure that you consider all the factors like interest rates, loan term and other hidden costs before you choose one.
• Do not appear desperate to get a mortgage refinance. Remember that there are many unscrupulous companies and lenders ready to take advantage of your situation. So, beware of such companies that make you believe that you have no other options to look into.
Benefits of a bad credit mortgage refinance loan
There are many advantages of taking out a bad credit mortgage refinance:
1. Refinance can lower your monthly payments by extending the mortgage repayment period making your payments affordable.
2. As the monthly payments become affordable, you'll be able to repay the loan sooner and this will help you to improve your credit score.
3. You can lock in more favorable mortgage interest rates which will also make your payments easier.
Remember that a larger down payment can help you get to refinance mortgage with bad credit more easily. So, when you have a low credit score, you need more cash on hand to compensate on home loan.
Friday, May 7, 2010
Monday, April 19, 2010
Government offers Home Affordable Modification Program
New alternatives to foreclosure unveiled
Government offers Home Affordable Modification Program
Homeowners who can't afford their mortgage payments may want to take a look at the federal government's new alternative to foreclosure: the Home Affordable Foreclosure Alternative program, or HAFA, which intended to encourage lenders to facilitate short sales and deeds-in-lieu, or DIL, as alternatives to foreclosure.
The program, which is a part of the Home Affordable Modification Program, or HAMP, may help some homeowners escape a bad situation, but the rules are complicated and they won't be able to keep their homes.
U.S. Treasury Assistant Secretary Herbert Allison explained the concept in congressional testimony.
"HAMP does not, nor was it ever intended to, address every delinquent loan," he said. "In these instances, the borrower may benefit from an alternative that helps the borrower transition to more affordable housing and avoid the substantial costs of foreclosure."
Here are some details from the government's 43-page directive for loan servicers:
A short sale allows the homeowner to sell the home and use the proceeds to satisfy the first mortgage even if the sale price is less than the loan balance.
A DIL allows the homeowner to voluntarily give up the home to satisfy the first mortgage even if the home is worth less than the loan balance.
The homeowner can get pre-approval for a short sale at a specific minimum price or net proceeds before the home is put on the market.
The homeowner can receive $1,500 for relocation expenses at closing. This sum may be reported to the Internal Revenue Service as income.
The home must be the homeowners principal residence.
The mortgage must be delinquent, or default must be reasonably foreseeable.
The unpaid loan balance must be less than $729,750 for a single house or condominium. Higher limits are allowed for two- to four-unit residential properties.
The homeowners monthly mortgage payment must be more than 31 percent of his or her gross income.
The homeowner must transfer clear title. The lender will allow up to three percent of each second loan or lien, up to $3,000 in total, to help the homeowner satisfy these obligations.
The government's directive excludes loans that are owned or guaranteed by Fannie Mae or Freddie Mac. However, the two government-run mortgage corporations are expected to release their own guidelines.
Homeowners can use the Loan Look Up Tool on the Making Home Affordable Web site to find out whether they have a Fannie Mae or Freddie Mac loan.
The lender cannot require a cash contribution or promissory note, cannot pursue a deficiency judgment and must release the homeowner from all future liability for the debt.
The loan servicer can use the financial information and hardship letter that the homeowner submitted for a loan modification, or request updated information to evaluate the homeowners eligibility.
The loan servicer must assess the current value of the home. If the short sale or DIL isn't completed, the servicer can add the cost of this assessment (e.g., an appraisal) to the loan balance.
The homeowner must sign a Short Sale Agreement or DIL Agreement on or before Dec. 31, 2012.
The home must be listed for sale with a licensed local-area real estate professional. (This requirement doesn't apply to DIL.)
The homeowner must cooperate with the real estate professionals efforts to sell the home and maintain the interior and exterior of the home.
The servicer and homeowner must meet a number of time frames.
The lender may require the homeowner to make full or partial payments on the mortgage, up to 31 percent of the homeowners income, subject to the lender's written policies.
The homeowner cannot have a close business or personal relationship with the real estate agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or DIL closes.
The lender can initiate or continue, but not complete a foreclosure sale while the homeowner is involved in the program.
Homeowners should discuss the income tax consequences of debt forgiveness with a qualified tax professional.
The servicer will report the short sale or DIL to the credit bureaus. That will hurt the homeowners credit score, although not as severely as a foreclosure.
The buyer in a short sale can't resell the home within 90 days of the purchase.
The program launched April 5 and is scheduled to sunset on Dec. 31, 2012. Servicers may elect to implement the program sooner than the official effective date.
Homeowners are encouraged to contact their loan servicers to find out whether they are eligible for the program or call the HOPE hot line at (888) 995-4673 to speak to a government-certified mortgage counselor. More than 100 servicers have signed up for the program.
These servicers are required to participate and write their own policies subject to investor guidelines.
Going up
Mortgage rates jumped for the second straight week.
The average 30-year fixed-rate mortgage rose 12 basis points, to 5.35 percent. A basis point is one-hundredth of a percentage point. Rates have risen 24 basis points in two weeks and are now at their highest point since Nov. 4, 2009.
Meanwhile, this week's average 15-year fixed-rate — a popular option for refinancing — leapt 16 basis points, to 4.69 percent.
The average jumbo 30-year fixed rose 6 basis points, to 5.98 percent.
Adjustable-rate mortgages split this week. The one-year adjustable-rate mortgage remained unchanged, at 4.74 percent. Meanwhile, the popular 5/1 ARM rose 4 basis points, to 4.55 percent.
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Government offers Home Affordable Modification Program
Homeowners who can't afford their mortgage payments may want to take a look at the federal government's new alternative to foreclosure: the Home Affordable Foreclosure Alternative program, or HAFA, which intended to encourage lenders to facilitate short sales and deeds-in-lieu, or DIL, as alternatives to foreclosure.
The program, which is a part of the Home Affordable Modification Program, or HAMP, may help some homeowners escape a bad situation, but the rules are complicated and they won't be able to keep their homes.
U.S. Treasury Assistant Secretary Herbert Allison explained the concept in congressional testimony.
"HAMP does not, nor was it ever intended to, address every delinquent loan," he said. "In these instances, the borrower may benefit from an alternative that helps the borrower transition to more affordable housing and avoid the substantial costs of foreclosure."
Here are some details from the government's 43-page directive for loan servicers:
A short sale allows the homeowner to sell the home and use the proceeds to satisfy the first mortgage even if the sale price is less than the loan balance.
A DIL allows the homeowner to voluntarily give up the home to satisfy the first mortgage even if the home is worth less than the loan balance.
The homeowner can get pre-approval for a short sale at a specific minimum price or net proceeds before the home is put on the market.
The homeowner can receive $1,500 for relocation expenses at closing. This sum may be reported to the Internal Revenue Service as income.
The home must be the homeowners principal residence.
The mortgage must be delinquent, or default must be reasonably foreseeable.
The unpaid loan balance must be less than $729,750 for a single house or condominium. Higher limits are allowed for two- to four-unit residential properties.
The homeowners monthly mortgage payment must be more than 31 percent of his or her gross income.
The homeowner must transfer clear title. The lender will allow up to three percent of each second loan or lien, up to $3,000 in total, to help the homeowner satisfy these obligations.
The government's directive excludes loans that are owned or guaranteed by Fannie Mae or Freddie Mac. However, the two government-run mortgage corporations are expected to release their own guidelines.
Homeowners can use the Loan Look Up Tool on the Making Home Affordable Web site to find out whether they have a Fannie Mae or Freddie Mac loan.
The lender cannot require a cash contribution or promissory note, cannot pursue a deficiency judgment and must release the homeowner from all future liability for the debt.
The loan servicer can use the financial information and hardship letter that the homeowner submitted for a loan modification, or request updated information to evaluate the homeowners eligibility.
The loan servicer must assess the current value of the home. If the short sale or DIL isn't completed, the servicer can add the cost of this assessment (e.g., an appraisal) to the loan balance.
The homeowner must sign a Short Sale Agreement or DIL Agreement on or before Dec. 31, 2012.
The home must be listed for sale with a licensed local-area real estate professional. (This requirement doesn't apply to DIL.)
The homeowner must cooperate with the real estate professionals efforts to sell the home and maintain the interior and exterior of the home.
The servicer and homeowner must meet a number of time frames.
The lender may require the homeowner to make full or partial payments on the mortgage, up to 31 percent of the homeowners income, subject to the lender's written policies.
The homeowner cannot have a close business or personal relationship with the real estate agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or DIL closes.
The lender can initiate or continue, but not complete a foreclosure sale while the homeowner is involved in the program.
Homeowners should discuss the income tax consequences of debt forgiveness with a qualified tax professional.
The servicer will report the short sale or DIL to the credit bureaus. That will hurt the homeowners credit score, although not as severely as a foreclosure.
The buyer in a short sale can't resell the home within 90 days of the purchase.
The program launched April 5 and is scheduled to sunset on Dec. 31, 2012. Servicers may elect to implement the program sooner than the official effective date.
Homeowners are encouraged to contact their loan servicers to find out whether they are eligible for the program or call the HOPE hot line at (888) 995-4673 to speak to a government-certified mortgage counselor. More than 100 servicers have signed up for the program.
These servicers are required to participate and write their own policies subject to investor guidelines.
Going up
Mortgage rates jumped for the second straight week.
The average 30-year fixed-rate mortgage rose 12 basis points, to 5.35 percent. A basis point is one-hundredth of a percentage point. Rates have risen 24 basis points in two weeks and are now at their highest point since Nov. 4, 2009.
Meanwhile, this week's average 15-year fixed-rate — a popular option for refinancing — leapt 16 basis points, to 4.69 percent.
The average jumbo 30-year fixed rose 6 basis points, to 5.98 percent.
Adjustable-rate mortgages split this week. The one-year adjustable-rate mortgage remained unchanged, at 4.74 percent. Meanwhile, the popular 5/1 ARM rose 4 basis points, to 4.55 percent.
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Sunday, April 18, 2010
Second mortgages may haunt borrowers in foreclosure
Just when owners think their mortgage nightmare has ended with the loss of their home through foreclosure, the next round of bad news knocks at the door: the bank holding their second trust deed demands repayment of the loan.
Despite heavy political pressure to write off so-called "junior"- or second-lien, mortgages to help struggling owners keep their homes, banks aren't always willing to follow that script. Why? Because those loans amounted to $1 trillion in the U.S. at the end of last year, according to the Federal Reserve, and many banks hold a lot of that paper. A second trust deed is a loan in a subordinate position to a first trust deed loan secured by the same collateral.
Although owners and many banks are trying to strike deals to reduce the payments on homeowners' first mortgages, the main sticking point to consummating those transactions is that lenders holding the first liens often will not accept a deal unless the banks holding the second mortgages take a hit too. But those banks, which are trying to get their assets back in the positive column, don't always want to write off the junior liens.
It's not unusual for second liens -- typically loans taken out after the house was purchased -- to lack collateral backing today because of the steep drop in home values; sometimes a second mortgage is below the amount owed on the first mortgage alone. That's why some politicians are urging banks to write off those "worthless" second liens. Many homeowners who are in default on their first mortgages, however, still are making monthly payments on the second liens, so banks don't want to kiss those loans off. The ability for banks to collect on second liens varies by state.
How pervasive is the problem?
"I see it all the time," says accountant Earl Salter, an enrolled agent with Norwalk Business Service in Norwalk, Calif. Financially shaky owners who have lost their homes to foreclosure and face second-lien lenders demanding repayment "have two choices: file bankruptcy or try to strike a deal with the holder of the second to accept 10 or 15 cents on the dollar" owed, he said.
If lenders and borrowers don't strike a deal, lenders may garnish the borrowers' wages and other assets, if the owners have some income or the potential for income. In some cases, banks sell the junior-lien loans to collection agencies, which take over recovery of the debt.
While many banks are making decisions about repayment of second-lien loans on a case-by-case basis, lawmakers are seeking solutions for borrowers unable to repay junior-lien debts. One U.S. Treasury program requires the reduction of payments on junior-lien mortgages by participating lenders if they're allowing reductions on first mortgages.
Of one thing you can be sure: we haven't heard the last of this issue yet. Other programs already are on the table.
Diane Wedner
Despite heavy political pressure to write off so-called "junior"- or second-lien, mortgages to help struggling owners keep their homes, banks aren't always willing to follow that script. Why? Because those loans amounted to $1 trillion in the U.S. at the end of last year, according to the Federal Reserve, and many banks hold a lot of that paper. A second trust deed is a loan in a subordinate position to a first trust deed loan secured by the same collateral.
Although owners and many banks are trying to strike deals to reduce the payments on homeowners' first mortgages, the main sticking point to consummating those transactions is that lenders holding the first liens often will not accept a deal unless the banks holding the second mortgages take a hit too. But those banks, which are trying to get their assets back in the positive column, don't always want to write off the junior liens.
It's not unusual for second liens -- typically loans taken out after the house was purchased -- to lack collateral backing today because of the steep drop in home values; sometimes a second mortgage is below the amount owed on the first mortgage alone. That's why some politicians are urging banks to write off those "worthless" second liens. Many homeowners who are in default on their first mortgages, however, still are making monthly payments on the second liens, so banks don't want to kiss those loans off. The ability for banks to collect on second liens varies by state.
How pervasive is the problem?
"I see it all the time," says accountant Earl Salter, an enrolled agent with Norwalk Business Service in Norwalk, Calif. Financially shaky owners who have lost their homes to foreclosure and face second-lien lenders demanding repayment "have two choices: file bankruptcy or try to strike a deal with the holder of the second to accept 10 or 15 cents on the dollar" owed, he said.
If lenders and borrowers don't strike a deal, lenders may garnish the borrowers' wages and other assets, if the owners have some income or the potential for income. In some cases, banks sell the junior-lien loans to collection agencies, which take over recovery of the debt.
While many banks are making decisions about repayment of second-lien loans on a case-by-case basis, lawmakers are seeking solutions for borrowers unable to repay junior-lien debts. One U.S. Treasury program requires the reduction of payments on junior-lien mortgages by participating lenders if they're allowing reductions on first mortgages.
Of one thing you can be sure: we haven't heard the last of this issue yet. Other programs already are on the table.
Diane Wedner
Thursday, April 8, 2010
Wednesday, March 31, 2010
Help Sell Your Home Faster
1. Get a home inspection before you sell. It is always better to be proactive and know what if anything is wrong with your home before a buyer does. They will ask you to drastically reduce your asking price.
2. Clean clutter. Nothing turns off a buyer like junk and clutter.
3. Ask 10% lower price than the property is worth. This will bring more buyers and the price will get bid up.
4. Get light into the home. Clean windows and get rid of dark drapes. Nothing sell better than natural light, it makes your rooms look bigger.
5. You do not need to bake cookies. Place a few drops of vanilla on a warm oven door will produce the same results.
6. Replace a worn mailbox. This will enhance the curb appeal.
Please feel free to post your tips.
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2. Clean clutter. Nothing turns off a buyer like junk and clutter.
3. Ask 10% lower price than the property is worth. This will bring more buyers and the price will get bid up.
4. Get light into the home. Clean windows and get rid of dark drapes. Nothing sell better than natural light, it makes your rooms look bigger.
5. You do not need to bake cookies. Place a few drops of vanilla on a warm oven door will produce the same results.
6. Replace a worn mailbox. This will enhance the curb appeal.
Please feel free to post your tips.
Visit Our Blog
Saturday, March 13, 2010
Wednesday, March 3, 2010
Seller financing can be a great way to get a house sold.
Seller financing can be a great way to get a house sold without
slashing the price. By recognizing the millions of people who can't
get traditional financing as potential buyers, resourceful property
sellers (and their real estate agents) can minimize their time
investment in getting a property sold. Even better, sellers who offer
financing can usually get a higher asking price for their property,
even in the slowest markets. Clearly this is a win-win situation.
Most home sellers never consider financing the buyer directly because
they are not aware of the benefits or don't fully understand how
creating a note works. Let's take a closer look at the advantages of
owner finance.
Three Advantages
Seller financing is very powerful when the market is slow or when
there are many similar houses on the market. Just listing the house as
"OWC" - Owner Will Carry - will make the house stand out and attract
more buyers. Because many individuals cannot get funding from a bank,
offering financing will open the doors to these prospective customers
as well, essentially significantly increasing the pool of potential
buyers. So, advantage #1 is MORE BUYERS.
Seller financing also brings the property seller another critical
advantage . the likelihood of selling for a higher price. Offering to
carry back a note will not only greatly increase the number of
potential buyers, but also bring a unique demographic of buyers who
are willing to pay more for a given property than the general
population. Advantage #2: MORE MONEY.
Additionally, when the property seller finances the buyer, they get to
act as "the bank". That means they could structure the deal to collect
interest. Over time, if the seller holds on to their note, this can
add up to tens of thousands of dollars in additional income. Advantage
#3: LONG TERM PROFIT.
The Seller's Strategy
Even when these benefits to "carryback" lending are made clear, many
sellers are still hesitant to offer financing because they are
entering unfamiliar territory. It's a natural, human response --
everyone is uncomfortable with new things.
For many property sellers, considering owner financing when they've
only dealt with buyers via traditional funding is definitely "thinking
outside the box". But once sellers understand the process, they are
likely to choose seller financing instead of the unattractive option
of cutting the listed price or waiting indefinitely for the "right
buyer".
A seller-financed real estate sale is simply a real estate transaction
where the seller acts as "the bank" or lending institution. The seller
sets the sales price, determines and accepts a down payment, and then
finances the remaining balance. The final step is the part that may
scare some sellers, but in actuality, it can be very simple. Here is
an example.
If the sales price is $100,000.00, and the buyer gives the seller
$10,000.00 cash (the agent's fee will be deducted from this down
payment), the seller will finance the balance of $90,000.00. The buyer
and seller would then agree to the terms, such as the interest rate
and the total term, and use an attorney to create the mortgage
document and close the deal. From that point on, the buyer sends the
seller monthly payments for the house he/she has just purchased.
Special Circumstances (and a Solution)
The whole process can really be that simple. But, there are some
substantial differences between a seller-financed deal and one that
relies on traditional bank funding.
First of all, the seller in this example does not receive a large,
one-time payment at the time of the sale. In fact, they will only
receive the down payment, and in some situations, most of that will go
towards paying the real estate agent's fee. On the other hand, the
seller will be receiving monthly payments at a decent interest rate,
but this income stream can't be used as a down payment for a new
house.
Since many home sellers are also looking to buy another property, the
seller will need to get enough at closing to pay their own down
payment. Without this payment, the seller's hands will be tied when
they look to purchase another house and need to have a substantial
amount of funds available. There is a common solution to this issue,
however.
The Solution
In order to get the money the seller needs from the loan they just
created, the seller could sell the monthly note payments to a
specialist buyer for a lump sum of cash. If the seller finds someone
willing to buy the payments, now they can "have their cake and eat it
too".
In summary.
Step one: Use the seller finance option to find unique customers
willing to buy the house at a higher price than would have been
possible otherwise and complete the real estate transaction quickly.
Step two: Decide on the terms of the deal and create the note.
Step three: If the property seller needs immediate cash to buy another
house or for any other reason, their new incoming payment stream can
be resold. The person who buys the future payments from the seller
will provide the funding to act as a down payment on a new house, and
every party involved in the deal comes out smiling.
Click on the link in our sidebar to contact us.
slashing the price. By recognizing the millions of people who can't
get traditional financing as potential buyers, resourceful property
sellers (and their real estate agents) can minimize their time
investment in getting a property sold. Even better, sellers who offer
financing can usually get a higher asking price for their property,
even in the slowest markets. Clearly this is a win-win situation.
Most home sellers never consider financing the buyer directly because
they are not aware of the benefits or don't fully understand how
creating a note works. Let's take a closer look at the advantages of
owner finance.
Three Advantages
Seller financing is very powerful when the market is slow or when
there are many similar houses on the market. Just listing the house as
"OWC" - Owner Will Carry - will make the house stand out and attract
more buyers. Because many individuals cannot get funding from a bank,
offering financing will open the doors to these prospective customers
as well, essentially significantly increasing the pool of potential
buyers. So, advantage #1 is MORE BUYERS.
Seller financing also brings the property seller another critical
advantage . the likelihood of selling for a higher price. Offering to
carry back a note will not only greatly increase the number of
potential buyers, but also bring a unique demographic of buyers who
are willing to pay more for a given property than the general
population. Advantage #2: MORE MONEY.
Additionally, when the property seller finances the buyer, they get to
act as "the bank". That means they could structure the deal to collect
interest. Over time, if the seller holds on to their note, this can
add up to tens of thousands of dollars in additional income. Advantage
#3: LONG TERM PROFIT.
The Seller's Strategy
Even when these benefits to "carryback" lending are made clear, many
sellers are still hesitant to offer financing because they are
entering unfamiliar territory. It's a natural, human response --
everyone is uncomfortable with new things.
For many property sellers, considering owner financing when they've
only dealt with buyers via traditional funding is definitely "thinking
outside the box". But once sellers understand the process, they are
likely to choose seller financing instead of the unattractive option
of cutting the listed price or waiting indefinitely for the "right
buyer".
A seller-financed real estate sale is simply a real estate transaction
where the seller acts as "the bank" or lending institution. The seller
sets the sales price, determines and accepts a down payment, and then
finances the remaining balance. The final step is the part that may
scare some sellers, but in actuality, it can be very simple. Here is
an example.
If the sales price is $100,000.00, and the buyer gives the seller
$10,000.00 cash (the agent's fee will be deducted from this down
payment), the seller will finance the balance of $90,000.00. The buyer
and seller would then agree to the terms, such as the interest rate
and the total term, and use an attorney to create the mortgage
document and close the deal. From that point on, the buyer sends the
seller monthly payments for the house he/she has just purchased.
Special Circumstances (and a Solution)
The whole process can really be that simple. But, there are some
substantial differences between a seller-financed deal and one that
relies on traditional bank funding.
First of all, the seller in this example does not receive a large,
one-time payment at the time of the sale. In fact, they will only
receive the down payment, and in some situations, most of that will go
towards paying the real estate agent's fee. On the other hand, the
seller will be receiving monthly payments at a decent interest rate,
but this income stream can't be used as a down payment for a new
house.
Since many home sellers are also looking to buy another property, the
seller will need to get enough at closing to pay their own down
payment. Without this payment, the seller's hands will be tied when
they look to purchase another house and need to have a substantial
amount of funds available. There is a common solution to this issue,
however.
The Solution
In order to get the money the seller needs from the loan they just
created, the seller could sell the monthly note payments to a
specialist buyer for a lump sum of cash. If the seller finds someone
willing to buy the payments, now they can "have their cake and eat it
too".
In summary.
Step one: Use the seller finance option to find unique customers
willing to buy the house at a higher price than would have been
possible otherwise and complete the real estate transaction quickly.
Step two: Decide on the terms of the deal and create the note.
Step three: If the property seller needs immediate cash to buy another
house or for any other reason, their new incoming payment stream can
be resold. The person who buys the future payments from the seller
will provide the funding to act as a down payment on a new house, and
every party involved in the deal comes out smiling.
Click on the link in our sidebar to contact us.
Tuesday, March 2, 2010
Getting More Than The Asking Price For Your Property
When the number of real estate buyers is greater than the number of available homes, real estate property values usually go up. It’s an ideal environment for sellers because buyers are forced to compete, and properties usually sell quickly – often for even more than the asking price!
But as more properties go on the market, buyer competition subsides. Prices level out, and eventually drop. Most assume this is a bad time to sell a home. But in fact, it can be the best time for educated sellers to tap into a little-known market, using the creative power of seller financing.
A seller’s best strategy
With the help of a professional Note Finder, a seller can open the doors to buyers normally locked out by traditional financing. A so-called “down market” is the ideal time for resourceful sellers to target the millions of people who can’t get funding. These buyers are often willing to pay more in order to buy a home without traditional financing.
The seller sets the price, determines and accepts a down payment, and then finances the remaining balance. The buyer gets a home without having to fully-qualify for a traditional loan. It’s a favorable situation for both seller and buyer. And while this “outside of the box” form of financing can seem a bit daunting, it can happen very smoothly and easily with the knowledge, experience, and guidance of a professional Note Finder like me.
Here is an example: If the seller wants $100,000 for the property, and the buyer gives the seller $10,000 cash, the seller will finance the balance of $90,000. The buyer and seller would then agree to the terms, such as the interest rate and the total term, and use an attorney to create the mortgage document and close the deal. From that point on the buyer sends the seller monthly payments for the house he has just purchased.
A great opportunity for sellers
The whole process can really be that simple. But there are some substantial differences between a seller-financed deal and one that relies on traditional bank funding.
First of all, the seller will not receive a large one-time payment at the time of the sale. In fact, she will only receive the down payment. Since many home sellers are also looking to buy another property, the seller may need to get enough at closing to pay her down payment. Without this payment, the seller’s hands could be tied when she looks to purchase another house. There is a common solution to this issue that offers the potential for even MORE money to the seller!
Note Finders specialize in helping new mortgage holders sell newly-created notes for a lump sum of cash. In the end, seller financing could be used to sell property at a higher price than expected and the sellers could get the money they need. Essentially, sellers can “have their cake and eat it too.”
In summary
Step #1: Use the seller-finance option to find unique customers willing to purchase at a higher price than would have been possible otherwise.
Step #2: Decide on the terms of the deal and create the note to complete the real estate transaction quickly.
Step #3: If the property seller needs immediate cash, contact me to help locate a buyer for the new mortgage note. The person who buys the future payments from the seller will likely provide the funding to act as a down payment on a new house and every party involved in the deal comes out smiling.
Equity attracts Note Buyers
One key to liquidating a seller-financed mortgage is found in the property’s equity. The equity in the private note essentially acts as a “safety net” for the Note Buyer, in case there is a problem collecting the payments. So note buyers find deals with strong equity more attractive.
Remember, a Note Buyer is purchasing monthly payments secured by property. If the property is worth more than the remaining balance of the note, the buyer could seize the extra value in a foreclosure situation by reselling the property. This allows the new Note Holder to recoup his initial outlay and receive the additional equity.
Most Note Buyers will do a quick equity check before looking at any other information. By first determining the note’s Loan-To-Value (LTV), buyers can decide whether to dig deeper or move on. The LTV is calculated by comparing the balance of all of the loans to the value of the property.
Two equity examples
To illustrate, let’s consider two houses, each valued at $100,000. One home has loans of $95,000 and the second home has loans of $70,000.
The first home has an LTV of 95 percent (95k/100k = 95), indicating only 5 percent equity (100 – 95 = 5).
The second home has an LTV of 70 percent (70k/100k = 70), showing 30 percent equity in the property (100 – 70 = 30).
Clearly, most buyers will not be as interested in the note on the first home because there is virtually no protective equity. In this situation, the buyer of the note would want to discount the note purchase a fair amount to make up for the fact that there is little equity.
The second note with 70 percent LTV will require less discounting, and the Note Holder will receive a larger portion of their note as compared to the note balance. This is because the Note Buyer stands to benefit from holding a substantial amount of equity in the property (30 percent) if the Payor were to default on their obligation.
How Does Down Payment
Affect Note Value?
For many Note Buyers the amount of the initial down payment at the time of sale can make or break a note deal. The down payment is applied directly toward principal, creating instant equity in the property. Accordingly, most Note Buyers want to confirm the amount of the down payment up front.
With no down payment, it would take many years to build a meaningful amount of equity in the property. Take a look at the following example that illustrates this point.
House #1: valued at $100,000, with a down payment of $20,000 made at the time of sale.
House #2: also valued at $100,000, but with zero down payment made at the time of sale.
The note on House #1 has $20,000 in equity. No down payment made on House #2 means that there is no equity in the property before the first monthly payment is made.
Consider how much “upfront” money there is
Assuming that House #2 was sold for $100,000 with a 30-year note amortized at 8 percent interest, it could take years to build $20,000 in equity.
Because the Note Holder’s purchase is protected by the equity in the property, the amount of the down payment is an important consideration. With the zero down note on House #2, the Note Buyer would need to apply a larger discount in order to make it a fair deal for him. On the other hand, while the note on House #1 is secured by a $20,000 down payment and has substantial protective equity even before the first monthly payment, it would cost the Note Buyer a lot more.
Almost any note deal can be a good deal… for everyone involved
A strong down payment lends a side benefit related to having protective equity. When a large down payment is made at the time of sale, that person is more likely to be committed to owning the house and keeping up with the note payments. Seller-financed deals with zero down payment are very attractive to first-time home buyers or others without a large nest egg saved – but it can be riskier for the Note Buyer. So the educated Note Buyers can offset this risk by increasing the discount on low or zero down payment notes.
Remember, even a note created without a down payment can be a sound purchase. The key is to look at each situation individually and to establish a fair price based on the specific note.
Even when liquidating a private mortgages at a discount, Note Sellers still get to receive a lump sum of cash immediately instead of waiting years – decades, even – before the debt owed to them is paid.
The bottom line is that a qualified professional Note Finder can bring a benefit to both parties – the Note Holder and the buyer. In the end, when a deal is struck, everyone wins and ends up in a stronger financial position.
How Creative Home Sellers Have The Advantage
Creative home sellers offering seller financing can often sell their houses faster in a slow market - often at a higher price! In the process, these sellers act as the “bank,” and begin to receive monthly payments instead of a lump sum of cash.
So what happens when those offering seller financing need an immediate lump sum of cash instead of scheduled future payments? Locating a buyer for the newly-created cash flow could be the answer.
To get the money they need, sellers that offer financing could sell the future mortgage payments they are set to receive.
How sellers get quick cash for their notes
This process can be streamlined when the savvy home seller lines up a buyer for the payment stream before the note is even created. This way the property seller could have a buyer for the payment stream ready to make the purchase as soon as the new private mortgage is created. Once the closing and the note sale are complete the seller will have the money she needs for her next home.
Finding the buyer for the seller-financed mortgage is the tricky part. Buyer's won't line up at the door. In fact, they don't often browse the newspaper or the web looking for people with notes to sell. This is where the professional Note finder comes in!
Note Finders are real estate professionals that specialize in connecting the people who create notes with those who buy them.
While I do not assist with the creation of a note, I can provide general recommendations about the types of terms that are attractive to Note Buyers. With my knowledge, experience, and connections within the secondary finance industry, I can save home sellers a lot of time and effort when liquidating a note. Most importantly, I can help locate a buyer for your note and make the process smooth and easy.
When working with a property seller who needs a lump sum of cash immediately after selling real estate, contacting a finder like me early in the process of creating the real estate note makes sense.
By involving a Note finder before a note is created, the property seller can receive valuable input about the payment characteristics that Note Buyers prefer.
And for any completed seller-financed deals, a qualified Note finder can help Note Holders obtain a large amount of cash in exchange for future payments.
But as more properties go on the market, buyer competition subsides. Prices level out, and eventually drop. Most assume this is a bad time to sell a home. But in fact, it can be the best time for educated sellers to tap into a little-known market, using the creative power of seller financing.
A seller’s best strategy
With the help of a professional Note Finder, a seller can open the doors to buyers normally locked out by traditional financing. A so-called “down market” is the ideal time for resourceful sellers to target the millions of people who can’t get funding. These buyers are often willing to pay more in order to buy a home without traditional financing.
The seller sets the price, determines and accepts a down payment, and then finances the remaining balance. The buyer gets a home without having to fully-qualify for a traditional loan. It’s a favorable situation for both seller and buyer. And while this “outside of the box” form of financing can seem a bit daunting, it can happen very smoothly and easily with the knowledge, experience, and guidance of a professional Note Finder like me.
Here is an example: If the seller wants $100,000 for the property, and the buyer gives the seller $10,000 cash, the seller will finance the balance of $90,000. The buyer and seller would then agree to the terms, such as the interest rate and the total term, and use an attorney to create the mortgage document and close the deal. From that point on the buyer sends the seller monthly payments for the house he has just purchased.
A great opportunity for sellers
The whole process can really be that simple. But there are some substantial differences between a seller-financed deal and one that relies on traditional bank funding.
First of all, the seller will not receive a large one-time payment at the time of the sale. In fact, she will only receive the down payment. Since many home sellers are also looking to buy another property, the seller may need to get enough at closing to pay her down payment. Without this payment, the seller’s hands could be tied when she looks to purchase another house. There is a common solution to this issue that offers the potential for even MORE money to the seller!
Note Finders specialize in helping new mortgage holders sell newly-created notes for a lump sum of cash. In the end, seller financing could be used to sell property at a higher price than expected and the sellers could get the money they need. Essentially, sellers can “have their cake and eat it too.”
In summary
Step #1: Use the seller-finance option to find unique customers willing to purchase at a higher price than would have been possible otherwise.
Step #2: Decide on the terms of the deal and create the note to complete the real estate transaction quickly.
Step #3: If the property seller needs immediate cash, contact me to help locate a buyer for the new mortgage note. The person who buys the future payments from the seller will likely provide the funding to act as a down payment on a new house and every party involved in the deal comes out smiling.
Equity attracts Note Buyers
One key to liquidating a seller-financed mortgage is found in the property’s equity. The equity in the private note essentially acts as a “safety net” for the Note Buyer, in case there is a problem collecting the payments. So note buyers find deals with strong equity more attractive.
Remember, a Note Buyer is purchasing monthly payments secured by property. If the property is worth more than the remaining balance of the note, the buyer could seize the extra value in a foreclosure situation by reselling the property. This allows the new Note Holder to recoup his initial outlay and receive the additional equity.
Most Note Buyers will do a quick equity check before looking at any other information. By first determining the note’s Loan-To-Value (LTV), buyers can decide whether to dig deeper or move on. The LTV is calculated by comparing the balance of all of the loans to the value of the property.
Two equity examples
To illustrate, let’s consider two houses, each valued at $100,000. One home has loans of $95,000 and the second home has loans of $70,000.
The first home has an LTV of 95 percent (95k/100k = 95), indicating only 5 percent equity (100 – 95 = 5).
The second home has an LTV of 70 percent (70k/100k = 70), showing 30 percent equity in the property (100 – 70 = 30).
Clearly, most buyers will not be as interested in the note on the first home because there is virtually no protective equity. In this situation, the buyer of the note would want to discount the note purchase a fair amount to make up for the fact that there is little equity.
The second note with 70 percent LTV will require less discounting, and the Note Holder will receive a larger portion of their note as compared to the note balance. This is because the Note Buyer stands to benefit from holding a substantial amount of equity in the property (30 percent) if the Payor were to default on their obligation.
How Does Down Payment
Affect Note Value?
For many Note Buyers the amount of the initial down payment at the time of sale can make or break a note deal. The down payment is applied directly toward principal, creating instant equity in the property. Accordingly, most Note Buyers want to confirm the amount of the down payment up front.
With no down payment, it would take many years to build a meaningful amount of equity in the property. Take a look at the following example that illustrates this point.
House #1: valued at $100,000, with a down payment of $20,000 made at the time of sale.
House #2: also valued at $100,000, but with zero down payment made at the time of sale.
The note on House #1 has $20,000 in equity. No down payment made on House #2 means that there is no equity in the property before the first monthly payment is made.
Consider how much “upfront” money there is
Assuming that House #2 was sold for $100,000 with a 30-year note amortized at 8 percent interest, it could take years to build $20,000 in equity.
Because the Note Holder’s purchase is protected by the equity in the property, the amount of the down payment is an important consideration. With the zero down note on House #2, the Note Buyer would need to apply a larger discount in order to make it a fair deal for him. On the other hand, while the note on House #1 is secured by a $20,000 down payment and has substantial protective equity even before the first monthly payment, it would cost the Note Buyer a lot more.
Almost any note deal can be a good deal… for everyone involved
A strong down payment lends a side benefit related to having protective equity. When a large down payment is made at the time of sale, that person is more likely to be committed to owning the house and keeping up with the note payments. Seller-financed deals with zero down payment are very attractive to first-time home buyers or others without a large nest egg saved – but it can be riskier for the Note Buyer. So the educated Note Buyers can offset this risk by increasing the discount on low or zero down payment notes.
Remember, even a note created without a down payment can be a sound purchase. The key is to look at each situation individually and to establish a fair price based on the specific note.
Even when liquidating a private mortgages at a discount, Note Sellers still get to receive a lump sum of cash immediately instead of waiting years – decades, even – before the debt owed to them is paid.
The bottom line is that a qualified professional Note Finder can bring a benefit to both parties – the Note Holder and the buyer. In the end, when a deal is struck, everyone wins and ends up in a stronger financial position.
How Creative Home Sellers Have The Advantage
Creative home sellers offering seller financing can often sell their houses faster in a slow market - often at a higher price! In the process, these sellers act as the “bank,” and begin to receive monthly payments instead of a lump sum of cash.
So what happens when those offering seller financing need an immediate lump sum of cash instead of scheduled future payments? Locating a buyer for the newly-created cash flow could be the answer.
To get the money they need, sellers that offer financing could sell the future mortgage payments they are set to receive.
How sellers get quick cash for their notes
This process can be streamlined when the savvy home seller lines up a buyer for the payment stream before the note is even created. This way the property seller could have a buyer for the payment stream ready to make the purchase as soon as the new private mortgage is created. Once the closing and the note sale are complete the seller will have the money she needs for her next home.
Finding the buyer for the seller-financed mortgage is the tricky part. Buyer's won't line up at the door. In fact, they don't often browse the newspaper or the web looking for people with notes to sell. This is where the professional Note finder comes in!
Note Finders are real estate professionals that specialize in connecting the people who create notes with those who buy them.
While I do not assist with the creation of a note, I can provide general recommendations about the types of terms that are attractive to Note Buyers. With my knowledge, experience, and connections within the secondary finance industry, I can save home sellers a lot of time and effort when liquidating a note. Most importantly, I can help locate a buyer for your note and make the process smooth and easy.
When working with a property seller who needs a lump sum of cash immediately after selling real estate, contacting a finder like me early in the process of creating the real estate note makes sense.
By involving a Note finder before a note is created, the property seller can receive valuable input about the payment characteristics that Note Buyers prefer.
And for any completed seller-financed deals, a qualified Note finder can help Note Holders obtain a large amount of cash in exchange for future payments.
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