Many banks will allow you to have as little as 5% into a home purchase, but will then only loan you 80%. The seller can take payments on a second mortgage from you for the other 15%.
This is the age of creative real estate financing. Maybe you remember when financing meant you saved up enough to put 20% down on a house, and then got a mortgage loan for the other 80%?
Manufacturer loans. Manufactured-home companies are arranging financing with 5% or less down for their buyers.
- State government housing programs. Most states have some sort of financing help in the form of a loan-guarantee program or outright loans for low-income buyers.
- VA mortgage loans. If you have been in the armed services, have a decent job, and can save two or three paychecks, you can probably get a home with a VA loan.
Called a “land contract” and other names depending on the part of the country you are in, this just means that you make payments to the seller instead of a bank. It’s up to you and them to negotiate downpayment amount, interest rate, and the term of the loan.
In some parts of the country, builders fund foundations that give you a portion of the downpayment, so you can get into a home with as little as 3% downpayment from your own pocket. FHA and other lenders have so far approved of or allowed this.
- FHA mortgage loans. The Farm Home Administration doesn’t actually loan the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, depending on the particular FHA program.
They are for those of you with bad credit but 20% to 30% to put down on a home.
That 7% return might look awfully good if their money is sitting in the bank at 2%.
Are there more ways to approach real estate financing? When you start investing, you can use other techniques for really creative real estate financing.
A risky way, but if you have a low-interest credit card, you can use it to come up with the downpayment, especially if you can pay it off soon, perhaps with a coming tax refund. The banks generally won’t allow this, but you can combine this with seller financing.
“No-doc” and “low-doc” loans, meaning no or low documentation requirements, are back, and you can find them through online banks. They are for those of you with bad credit but 20% to 30% to put down on a home.
Maybe you remember when financing meant you saved up enough to put 20% down on a house, and then got a mortgage loan for the other 80%? Many banks will allow you to have as little as 5% into a home purchase, but will then only loan you 80%. The Farm Home Administration doesn’t actually loan the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, depending on the particular FHA program.
Friend and family loans. That 7% return might look awfully good if their money is sitting in the bank at 2%.