The American Dream; what does it mean to you? People have different jobs, hobbies, or passions in life, but one constant remains the same among all of us, and this common thread that unites our My Update Web dreams is that of Home Ownership! Unfortunately, in this current economy, achieving the goal of homeownership is becoming more difficult than ever in recent history. Too many Americans follow the unwritten rule of home ownership that tells us to ‘Find a Realtor and Get a Bank Loan.’ That ‘ rule ‘ may have made sense to follow with thriving job markets, lower inflation, and less credit restraint in past economies.
But our current economic system makes it difficult for the average person to achieve the American Dream of Home Ownership. In times of unstable job markets, with double-digit unemployment forcing people to become self-employed to make a living, the banks require a W-2 stable job history to issue loans. In times of a great credit crisis, banks need stricter credit scores than most people can achieve. Fewer and fewer honest, hard-working Americans who are used to following the ‘traditional rules’ for owning a home have the opportunity to own their own homes.
What if you could achieve the American Dream of Home Ownership without the assistance of a bank?
This document aims to allow motivated home seekers an opportunity to write a New Rule of Home Ownership that will enable you to declare your freedom from the services of a Bank to partake in your piece of the American Dream of Home Ownership! To understand the New Rule of Home Ownership, let’s take a closer look at the existing rules of purchasing a house with Traditional Bank Financing. The first part of Traditional Bank Financing focuses on Qualifying for a Loan. While many different loan packages exist, the most common loan written in today’s market is an FHA Loan, and therefore, we shall use their guidelines as an example. The following are guidelines for an FHA Loan:
o FHA Loans require a minimum credit score of 620 to be eligible for a loan
o FHA will require 3.5% down on the home. This down payment MUST come from your account. You cannot borrow from friends, family, or anyone else. It would help if you documented where the funds for the down payment came from. Specifically, the down payment source must be from your personal checking, savings, or retirement account and CAN NOT be borrowed!
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To work with most Realtors, you must first get pre-approved by a bank. Many Realtors won’t even show you a house unless you can prove that you can afford and receive financing for the property. This painful process of pre-approval from a bank can take 2-3 days and involve the following steps:
o Proof of Creditworthiness o You must provide 2-4 years’ worth of tax returns! o You must provide your last four paycheck stubs if you are an employee or an updated Profit and Loss statement if you are self-employed, a business owner, an independent contractor, or an entrepreneur. However, suppose you cannot show a consistent pay stub as proof of income. In that case, you may want to skip to the part of this document where ‘Owner Financing’ is discussed, as you will find it increasingly difficult to qualify for a mortgage.
o Your bank may require you to pay off another debt to help improve your credit score to qualify for the loan
o And the worst part. This proof of creditworthiness is done throughout the entire home-buying process! Even once you qualify and pick out the home of your dreams, underwriters at the bank will have you go through the same approach to ensure you still qualify.
Now that you are pre-qualified for the home of your dreams, you may finally begin working with a Realtor to find your new home. Once you’ve found your home, the Traditional Banks will want an inspection performed on the home and may require the Seller to fix EVERYTHING for the bank to finance your loan. Some people want a small discount on the house and will do their repairs; however, a traditional bank often will not allow you to do this! These small fixes may add to the total price of the house.
Also, expect to pay Realtor fees, bank fees, filing fees, “point buy down” fees, loan origination fees, closing costs, title fees, surveys, appraisal fees, and anything else imaginable to be charged. Though many of these fees can be rolled into your loan, over the long term, you may be paying an extra 10% in unnecessary Financing Fees loaded into your loan! What if there was a quicker, easier, and less intrusive way to take your share of the American Dream? What if you could look at homes without paying a Realtor fee, pre-qualify for a loan, and go through a three month home buying process? After all, we ARE in a BUYER’S market in Real Estate, so why shouldn’t we be able to buy?
Consider the possibility of declaring a New Rule. Instead of working with (and paying for) a Realtor, why not work with the Seller directly? Especially if that Seller is a Professional Real Estate Investor who is not only willing to sell the house in a quick and simple matter but is also willing to FINANCE the sale of the house on a short-term basis! Earlier in this eBook, we reviewed the Tradition Bank Financing process. Now, we shall detail the 7 Easy Steps of Purchasing Your Home with Owner Financing:
* Contact the Seller of the Home without pre-qualifying for a loan and looking at the home to decide if you want to purchase.
* Settle on a price
* Agree to a down-payment and interest rate
* Once you’ve agreed to a price, down payment, and interest rate, complete a Deposit to Hold form and pay this 1% fee applicable to the property’s sales price. This fee will take the property off the market while you close the home.
* Fill out the credit application; provide two most recent paycheck stubs and bank statements to prove you can afford the monthly payment.
* (Optional) If you choose, you can order your home inspection to review the condition of the home
* Close in 2-5 business days
Buying a home from a Professional Real Estate Investor is quick and easy. Once you have settled on the price and monthly payments, you have minimal paperwork to complete and close the transaction within one week! The following is a summary of some of the benefits of Owner Financing compared with Traditional Bank Financing:
* In many cases, there is no minimum credit score required
* Instead of 10% Traditional Bank Finance Fees / Closing Costs, your Owner Finance Fee averages 5% of the transaction.
*, Unlike Traditional Bank Financing, your down payment for Owner Financing may come from almost anywhere (as long as it is a legal way to raise funds). You can borrow money from family, friends, and others. There are also some tax incentives for you to use as part of your retirement savings. Either way, with Owner Financing, you can raise your down payment as you see fit!
* You and the Owner Finance Seller will agree on a time to “close” on the home and may close within five business days!
* Your Owner Finance loan depends on your down payment and ability to pay the monthly fee, NOT on your credit or having a W-2 Job. Therefore, Business Owners, Entrepreneurs, Independent Contractors, and the Self-Employed may qualify for Owner Financed Homes!
* You are not required to provide extensive documentation to obtain your loan
Due to the efficiency, simplicity, and cost-effectiveness, you can see why buying directly from an investor with Owner Financing is the New Rule for Buying Homes. Owner Financing interest rates may be slightly higher than the market price when you initially purchase your home. However, this higher rate, along with a sizeable down payment, will help you obtain conventional financing at a lower rate when you decide to refinance! A good way to look at Owner Financing is that it is a solution to buying a home with short-term financing. Once you have paid your Owner Financed note on time for 12-24 months, it’s easier to refinance your existing message with a traditional bank loan at a lower interest. It’s much quicker, easier, and less intrusive to refinance a home into conventional financing than it is to purchase a home with traditional financing!
The following example will detail the process and the costs of owner financing:
o John purchases a beautiful home for $150,000 with a traditional bank loan. John’s credit score is 590, and the bank will not loan him any money until his credit score is at least 620. John understands the importance of owning a home and wants to buy something now. o John finds a home that is being offered for $150,000 with Owner Financing. John has $15,000 to put down and wants to close in 5 business days. John’s new loan is at an 8.5% rate for 30 years, and the sellers would like John to refinance his loan in 24-36 months. John’s monthly payment is $1,350, including Principle, Interest, Insurance, and HOA fees. John is happy because he can afford $1,350 monthly and participate in the American Dream! o As John pays on time for, say, 24 months, John has an excellent payment history with his current lender. John will also need to work on his credit in those 24 months to raise his score to the current minimum of 620. o When John approaches a traditional bank, John will be able to demonstrate the following:
o John’s $15,000 down payment shows that he has ‘skin in the game’ and is not just going to bail on his house payments o. John CAN afford and has been paying $1,350 a month at an 8.5% rate for his loan o. John’s credit score is now above the minimum required 620 o. If John can afford $1,350 a month at 8.5% interest, John can easily afford a $1,100 a month payment at 6.5%! It is much easier to refinance a loan than to get a loan for the original financing! Since you are already in the house, no inspection is required, no lengthy closing procedures, and no longer all that extra red tape associated with buying a home with traditional financing! As you can see, purchasing with Owner Financing can be easily done and quickly closed for those who cannot use a conventional bank loan but deserve to own a home now.
Due to tough economic times, many people are selling their properties in today’s market. Yet, even though this is a ‘buyer’s market,’ it is tougher to buy a home with Traditional Bank Financing than ever before. Following the old, unwritten rules will lead you to a long and unhappy life in an apartment complex. Motivated home seekers looking for their piece of the American Dream cannot achieve this great promise by traditional means due to stringent lending requirements initiated by the same financial institutions that gladly took over 1 billion of our tax dollars to bail them out! Banks tightening up on their lending practices is causing a shortage of homebuyers in the market
. This is one of the biggest reasons real estate values continue to fall free: not enough people can qualify for available homes while following the unwritten rules. Inspired home seekers looking to break away from the old constraints and ready to write their own New Rules for Home Ownership will be able to take advantage of this buyer’s market, and with Owner Financing, you will see more and more people purchasing homes. However, if you are in the market to buy a home, you cannot qualify for a traditional loan; I strongly recommend contacting a company specializing in Owner Finance Homes.