Creative Financing Information for Your Orlando Home Purchase
     
Custom Search

Creative Financing

First Time Home Buyer Bond Program

If you have not owned a home in the last three years, you could qualify as a first time home buyer. Under this bond program, through Trinity Mortgage, you may be eligible to receive up to $10,000 toward your down payment. For more information go to www.FirsTimeBuyer.info or www.DavidWelch.com/IndustryLinks and click on Trinity Mortgage near the top of the page to make application.

Seller Financing
As the seller, you have the option of financing the buyer's purchase with the equity you have in the property. You can finance part or the entire mortgage for the buyer. Before setting-up a private mortgage, it is wise to consult with your attorney.

Carrying Back a Second Mortgage
In the case of "carrying back a second mortgage", the seller loans the buyer part of the seller's equity. In this scenario, the buyer would finance the majority of the loan with a traditional mortgage lender and finance the remaining amount with the seller. Typically the buyer would pay a slightly higher interest rate on the loan financed by the seller.

Financial Issues

The Purchase Price
The seller and buyer's mutually agreed upon purchase price for the property. As the seller, you should know up-front that the buyer would like you to finance the deal. Knowing that you will be financing the deal may affect your willingness to make adjustments to the sales price.

The Down Payment
The size of the down payment may affect the buyer's commitment to honoring the mortgage contract. The larger the down payment the buyer invests, the stronger his/her motivation to protect the investment. In addition to making the monthly payments, the buyer's commitment to the investment would include a willingness to maintain and upgrade the property, as well as make tax and insurance payments.

The Interest Rate
At a minimum, the interest rate you charge should match current interest rates traditional mortgage lenders are offering for loans of the same term. You may want to charge an additional percentage point as compensation for the work involved with servicing the loan.

The Buyer's Credit & Income
You'll want to review the buyer's credit history to determine the buyer's willingness to pay his/her debts. A credit report will give you a better understanding of the buyer's financial history. Red flags would include late payments and loan defaults. If a buyer has a less than commendable credit history, you may decide not to finance the loan or you may require a larger down payment. In addition to the buyer's credit history, you'll want to review the buyer's income sources. Is the buyer's salary sufficient to make the monthly payments? Does the buyer have additional income sources that could be accessed if the buyer lost his/her job?

Amortization
The amortization period is the length during which the loan is repaid. The longer the amortization, the longer you are at risk that the buyer will default on the loan.

Balloon Payment
A common practice is to have the full amount of the loan due on a certain date, usually in 5 to 10 years. As the lender, this gives you a profitable short-term investment with the provision that your principal investment will be recouped in just 5 to 10 years.

The buyer is usually in a better position to secure traditional financing after 5 to 10 years. Both the buyer's equity in the property and record of timely mortgage payments can help the buyer secure a loan to cover the balloon payment.

Escrow for Tax and Insurance
Lenders typically require borrowers to pay 1/12 of their annual taxes and insurance costs as an escrow payment due with each mortgage payment. Then, the lender makes the borrower's annual tax and insurance payment. While this adds time and hassle to the seller-financer, it also protects you from the unfortunate situation of having a buyer make his/her mortgage payments but not tax and/or insurance payments.

Lender's Title Insurance
A smart investment is a lender's title insurance policy. The policy protects your lien on the property from being defeated by a prior lien or other interest in the property, which, if exercised, would wipe out your security. Things that can affect your rights as the seller-financer include marriage, divorce, death, forgery, a judgment for money damages, a failure to pay state or federal taxes, and more. Be sure to include the cost for your lender's title insurance as one of the buyer's closing costs.

Closing the Sale
Both buyer and seller will be responsible for paying the usual closing costs. You will also want the buyer to pay all the costs associated with setting up the mortgage financing. This would include the cost of having your attorney create the mortgage note.

by David Welch


RE/MAX 200 Realty 954 S. Orlando Ave. Winter Park, FL 32789
Phone: Cell:

ResultsforYou | Why Choose Me! | Staff Profiles | Contact Us | Free Home Valuation | Find A Home! | Links | Rentals | Remax Difference | UCF Knights | Short Sale | Baldwin Park Condo | YouTube Videos | Gatlin Place | Conway | Zillow Search | First Time Buyer | Baldwin Park | Avalon Park | Twitter | House Hunters | Orlando Homes | VoicePad | SocialBio | First Time Buyers | For Buyers | Tell a Friend | My Properties | Selling Your Home | Area Homes | Sold by David | My Featured Properties | Search Yahoo!® | Home | Applying for a Loan | Neighborhood Prices | 9 Steps to Owning | Site Map | 15 vs 30 Year Mtg Calc | Maximum Mortgage Calc | Rent vs Buy Calc | Mortgage Calculators | Request Industry Info | Your Dream Home | 9 Steps to Ownership | How to Sell Your Home | Staging Your Home | Reasons Homes Don't Sell | Be Accessible! | Buying Foreclosures/REO's | Home Price Index | Daily Rate Lock Advisory | Real Estate Optimist | Boca Raton Buyers | Cape Coral Buyers | Clearwater Buyers | Fort Myers Buyers | Jacksonville Buyers | Kissimmee Buyers | Miami Buyers | Naples Buyers | Orlando Buyers | Sarasota Buyers | Tampa Buyers | Boca Raton Sellers | Cape Coral Sellers | Clearwater Sellers | Fort Myers Sellers | Jacksonville Sellers | Kissimmee Sellers | Miami Sellers | Naples Sellers | Orlando Sellers | Sarasota Sellers | Tampa Sellers | Relocation | New Construction

Copyright © 2014 RE/MAX 200 Realty
Portions Copyright © 2014 a la mode, inc.
Another XSite by a la mode, inc. | Admin LoginTerms of UseSite Map
All rate, payment, and area information are estimates and approximations only.



 
State:
County:
City:
Zip: