Online Investing Daily

If you’re looking to buy a home of your own but don’t have adequate funds for a deposit or meet other criteria for a traditional mortgage, an owner financed home could provide an alternate path to homeownership. If you are paying rent every month, you’re not earning any return on that money - you are helping your landlord build equity in his property. Instead, you should build your own wealth through homeownership. When you own your home, every payment is an investment in a home that you will someday own outright.

With owner finance homes, you can borrow all or part of the purchase price of a home from the seller. For example, if you are close to qualifying for a traditional home loan but just need funds for the deposit, the current owner of the property that you are interested in purchasing can finance that part of the sale price. If you need to finance the entire purchase price of an owner finance home, this can often be arranged depending on the terms offered by the owner.

If you’ve been looking for an owner finance home by perusing real estate listings and ads, chances are you haven’t seen too many owner financed homes for sale. Don’t get discouraged - they are available - you just need to know where to look, and how to approach a seller about an owner finance option. Though a particular seller might not advertise owner financing, if a home has been on the market for a while and the seller does not want to budge on the price, then they might be willing to consider owner financing. Of course, this depends on whether the current owner is in a good financial position to take on an owner finance contract, but you’ll never know unless you make a proposal.

There are also websites, which specialize in marketing owner finance homes. You may not have to meet normal lending criteria but you will have to be able to prove your capacity to pay the required monthly payment. These payments are often higher than if you took out a traditional mortgage, however if you are able to make them they can be a means to an end. Once you build a history of payments and create equity in your home, you may be able to refinance with a bank or other traditional lender at a lower interest rate.

Before you decide to buy an owner financed home, make sure to hire an attorney to review the purchase and sale agreement. You need to clearly understand the terms of the loan and any associated risks of buying owner finance homes. Make sure there are no steep pre-payment penalties for early payoff - you’ll want to be able to pay off the loan should you choose to refinance later on. You’ll also need to be very clear about your rights and responsibilities under the contract.

Owner finance homes provide seller with the opportunity to quickly sell a home at the price they’ve set. But, buyers need to realize that the seller isn’t doing you a special favor. It’s important for buyers to exercise caution in evaluating any type of seller financing. All of the steps you would take for buying a home with a traditional lender, like a building inspection report and professional survey, should be undertaken.

It is important to proceed carefully, even though you may be eager to seal the deal quickly in your quest for homeownership. Owner financed homes can allow you to become a homeowner, but don’t rush - make sure you aren’t buying a problem home or succumbing to a predatory loan contract. Treat owner finance homes with caution, and make sure you do your research before signing on the dotted line.

If approached wisely, owner financed home can provide the way to your own home when other avenues are not available. If you approach owner financed home ownership with a long term plan in mind, you will be able to move to a traditional mortgage in the future if it offers a better deal.

Portfolio lending is becoming increasing popular. One of the reasons for this is portfolio lending is not restricted to the horrific 4 property rule. Through a portfolio lender, it is possible to acquire a multitude of mortgages. However, those looking to procure loans through entities such as Fannie Mae and Freddie Mac will run into the 4 property rule wall.

It is understandable that new rules need to be put in effect to prevent the fiasco that precipitated the nefarious $750 billion bailout bill. However, the onset of the 4 property rule is among the most egregious. In fact, this particular rule is a complete rejection of the principles that the free market is founded on. That is, the 4 property rule is a massive overreach of government regulation designed to limit the free market. Worst of all, this type of regulation limits a great deal of personal liberty and freedom.

So, what exactly is the 4 property rule? Well, the new conventional lending rules according to Fannie and Freddie state that a person will be limited to a maximum of four financed properties. This ridiculous rule takes away the ability to invest in real estate in the long term. If you are limited to only four financed properties, you can not flip many properties simultaneously or have a rental portfolio of any significance.

This type of rule does very little to help our economy recover. In my opinion, it is a form of Socialism. And, last time I looked we lived in a country founded on Capitalism. So, this rule overall does nothing to improve our situation and in fact the 4 property rule can significantly weaken our economy.

For example, prior to the current economic meltdown, many legitimate investors took advantage of skyrocketing real estate values. They would purchase properties at low prices and then sell high. In some cases, real estate investors would purchase significant volumes of property for resale. Some investors would purchase literally dozens of properties for resale. The profits derived from this wholesaling had an enormous benefit on the overall economy.

If there were no 4 property rule, the sale of of real estate would lead to a number of positive effects. For example, the revenues generated would lead to increased liquidity. It would also generate significant tax revenue to the state and local governments. And, of course, affordable housing would be plentiful. With this 4 property rule, none of this is possible. Hopefully, this rule will be overturned so we can return to a free market approach to investment real estate.

The good news is, regardless of whether or not this rule is revoked, portfolio lenders do not have to follow this 4 property rule. If you have more than 4 financed properties (or hope to), a portfolio lender is what you need.

If you find yourself facing foreclosure, there are probably several contributing factors, which have led to your situation. You might have lost your job, suffered an illness (and its accompanying medical bills) or been through a divorce. However you get here, one thing is certain; the bills are piling up and it is getting harder and harder to make ends meet. Even worse is the situation of having an adjustable rate mortgage whose interest rate has skyrocketed, making your payments much larger.

However, while you’re occupied by trying to stop foreclosure from happening, you’re being constantly deluged with calls, letters and even house calls.

These people are foreclosure investors; they make their money by pursuing homeowners who are on the verge of losing their homes, buying your home and selling it for a profit. They are operating on the assumption that you will have no choice but to sell your home.

Should you sell to an investor to avoid being foreclosed on? Maybe, but certainly not as your first option. And only after you exhausted other foreclosure prevention means such as rearranging your loan.

One of the Solutions To Stop Foreclosure Is Lender Mediation

If you have missed a few payments, your credit score will drop dramatically; once this data is on your credit report, it will be difficult if not impossible to get a new loan to refinance your existing mortgage.

Every mortgage lender in the country has a Loss Mitigation department established with the sole purpose of reducing lender’s losses on loans. They work to put homeowners who fell behind on payments on a repayment plan to bring your loan out of default. The best thing about Loss Mitigation alternative is, unlike a new loan, it doesn’t require a credit approval.

A Repayment Plan May Still Be Challenging

One of the biggest problems with these loss mitigation departments is they don’t employ enough people to handle unusually high rates of foreclosure the country is experiencing right now. In fact, these plans are often difficult to arrange due to the heavy workload, which these employees are faced with. Since loss mitigation departments have so little time available to work with each file, they will tend to offer repayment plans which don’t give you enough time to catch up with your payments, and monthly payments which are larger than you can realistically afford.

Since you are in such a difficult situation, you may be tempted to go with this plan anyway, if only to hold off foreclosure. Generally, this is exactly what happens; in a few months, you’ll probably be facing foreclosure again.

Watch Out When Hiring Workout Professionals To Stop Foreclosure

One of the easiest ways to get out of foreclosure by using the loss mitigation process is by getting a professional in the field to negotiate with the mortgage lender for you. There are companies who have extensive experience in this area and have negotiated thousands of repayment cases successfully for homeowners whose mortgages are in default. Some of these companies have strong working relationships with the loss mitigation departments of mortgage lenders all over the country.

Firms like these will take a thorough look at your finances and develop a repayment plan, which will meet your budget in order to allow you to successfully get back on track with your payments. These professionals have the inside track on the repayment programs, which may be available from different lenders, they may even be able to negotiate a lower interest rate to help you reduce your payments.

You may think in you current circumstances hiring a company like this could be prohibitively expensive. Not so. Most charge a reasonable flat fee equal to a single monthly mortgage payment. You’ll easily get your money back through a negotiated for you deferral of the next loan payment.

How to Cut Your Losses if Loss Mitigation is Not in Your Plans

If stopping foreclosure through loss mitigation isn’t in your plans, then it’s time to sell your home so you don’t have a foreclosure record on your credit. If you have a lot of time before the foreclosure sale, then list your home for sale with a real estate agent. This way you will get more for your property. If you’re out of time, now you may have to turn to investment companies that can buy quickly. Just make sure you’re dealing with a company that has means and track record to perform and close the purchase fast.

There are a lot of people out there who could potentially become very successful real estate investors, but most people don’t even try. Why? Because they themselves don’t have the money to invest in property and they think it would be too difficult to try to secure financing through traditional venues, such as a bank or other type of “hard money” lender. However, what they probably don’t know is that there is a better and easier way for real estate investors to finance properties and thus have success. That is, through private money lenders.

Private Money Loans: An Explanation

What is a private money lender? It’s a loan that is financed through an individual instead of an institution. That individual has extra money he or she wants to lend and make a profit with. This is an incredibly flexible financing strategy, because you can borrow from someone who is a regular individual just like yourself, instead of having to jump through the hoops set forth by banks and other lending institutions, which have to follow strict rules and regulations when they decide whether or not to lend someone money. In other words, private money lenders don not have to follow these rules.

Finance Your Properties Through a Private Money Lender: a Better Way

Banks and other traditional lending institutions are bound by strict rules and regulations. They have to follow these regulations exactly. However, private money lenders can choose who they want to lend to, regardless of the investors’ credit rating, financial statements, and other financial benchmarks.

The Benefits of a Private Money Loan

As an investor, you can appeal and make your case to a private money lender, explain to them why they should invest in your property, and allow them to come to their own conclusion. But the benefits of a private money loan do not end there. If the lender is interested in your offer, the two of you can then work out a financing and repayment arrangement that benefits both parties. You and the lender can both state your expectations and agree on an interest rate and payment schedule that makes both of you happy.

What’s more, since a private money loan is a short-term loan, the lender may even be willing to wait until after you flip the property to receive any repayment at all. This allows you to focus on fixing and selling the property, without the anxiety that can be associated with payments on a property that hasn’t brought in any money.

Drawbacks to Traditional Hard Money Loans

As opposed to private money loans that benefit both lender and borrower, bank loans are often one-sided. They get to hold you to extremely high standards and, if you are lucky enough to receive the privilege of their financing, they also get to benefit from a high interest rate and other fees. There is also no room for payment flexibility or special arrangements. Therefore, even if you have a spotless credit history and have a high probability of receiving financing from a hard money lender, there are still many advantages to seeking out a private money loan instead.

Private Money Loan Benefits Recap

If you work with a private money lender, the private lender can lend money to you as he sees fit and does not have to abide by the guidelines traditional lenders do. Because of this, if you have a less than spotless personal credit history, you may still be able to secure financing for your properties.

Opens the lines of communication between lender and borrower. Borrower can negotiate an interest rate or flat fee that is almost guaranteed to save money over a traditional loan.

Both the borrower and private money lender can negotiate payment arrangements that will benefit both of them. The lender may even be willing to forgo payments until the borrower has sold the property.

No financial application is required. Borrower can appeal directly to the private money lender and convince him to take a chance on the property in question.

The private money lender has the opportunity to see the borrower as an individual with goals instead of simply seeing the paper application that does or does not pass rigid, predetermined guidelines.

All of the above benefits mean that private money loans are often the most flexible and beneficial funding options for those who wish to invest in real estate. As a real estate investor, working with a private money lender gives you a number of options to work with and also opens the door to the opportunity of investing in real estate when it might otherwise not be available to you in the event you would have to go through a traditional lender to obtain your financing.