My first advice to you is, before you ever start looking for a deal on a house, find money to use to finance the purchase. Go to different banks in the area and tell them that you are thinking about buying a house and you want them to prequalify you.

Note:
The opinions expressed in this post are those of the author,
and do not reflect in any way those of the site owners.
As regards the articles on MORTGAGE, be careful when taking decision
unless you want to become a SLAVE to your debt.

Prequalifying for a mortgage means that you can determine how much you will be able to get from your financial institution to buy the house. You should go to different financial institutions. You can do most of this work by phone, fax, or on the internet. A lot of banks will give you bigger financing but then rates will go higher. Remember, the higher the interest rates are, the more your monthly payments will be. There are lots of books which will tell you that you can buy a home without any down payments. Sometimes, there are builders or individuals selling homes without any down payments, but their interest rates will be much higher. When you have high interest rates more than 8% then it is difficult to make money unless and until you stole the house at the time of purchase.

Under some government schemes like: if you are a first time house buyer, you can buy homes with only 5% down payment and the rest can be financed at a low interest rate. One of the best strategies is to lease the property for a period of 2 years or more and get an option to buy the property at a fixed price which will be determined at the time of buying. This is a very easy-to-write contract which I have written below. You also have a right to register this contract in the registrar’s office, which becomes like a lien on the property and the landlord cannot sell the property until the time your expiry date or lease is finished. Once you lease a house with the option to buy it, you have the right to buy the house. In 2 years, it gives you 2 years of time to buy the house. In the meantime, you can save some money as a down payment as well as find financing.

It is important that you don’t accept to buy a house that costs more than the market value of the house. You will have 2 years to buy and decide. If the value of properties goes up, then you will still be able to buy the house at a 2-year old price and all the profits will be there for you to keep. If, due to any reason, prices did not go up, then you can walk away from that deal or the owner may give you an additional 2 years to close on the same terms and conditions.

This is one of the best ways to buy a house, because you hardly need any money— maybe 2 months’ rent in advance, and if the value of the house does not go up, you can come out of it.

Now, you will like to know where to find this kind of seller and why that will seller agree to lease a house with those conditions. A lot of people, as well as developers speculate and buy and sell houses and sometimes make good money. When markets take a down turn like it has happened in the beginning of 2006 when interest rates started going up and the prices of houses started going down, then these people who had homes for speculation purposes could not sell them. Every month they still had to pay mortgage, taxes, insurance and maintenance on their houses. People started getting behind on their mortgage payments because they could not carry the house mortgage anymore. Now, they have 2 choices: either the banks foreclose them and screw up their credits or find someone who might lease them and at least pay back the interest and other expenses on these mortgages. If, after 3 years, they can sell the house at the price they bought it for, they will be also able to recover their down payments, which they had given to buy homes. So, it is a win-win situation for the seller and the person who has the option to buy it after 2 or 3 years. Now, the person who has the option to buy can buy this house anytime during his option-to-buy period. If the price of the home has gone up in 2 years by 20%, then the buyer may not have to come down with any down payment either, because appraisal of homes will be 20% more so the bank will be more than happy to finance the house at 100% of the value. The same principle applies with some contractors and builders who had built homes and cannot sell them. They will love to unload their houses, at least to pay their interest and expenses.

CREATIVE FINANCING: When purchasing real estate instead of traditional way of giving 10% to 40% of your money as down payment you buy a real estate without putting any of your own money it is called creative financing. For example if you take over the payment of existing mortgage on the property. It is possible to do these deal when vendor wants to really sell the property. Sometime vendor can take a collateral of your other property and lend you money for down payment if bank requires you to do that. There is always private money available at a higher rate from where down payment to the property can be obtained.

When I had just started real estate I remember buying a commercial property for $140000 and bank won’t lend more then $70000 at 7% on it as property was half empty but it still had a good positive cash flow. Seller agreed to carry second mortgage for $55000 at 12% for a period of 3 years so I was able to buy property with only $15000 down payment. I renovated the building in three months with a cost of $7000 and another bank gave me $280000 by the end of year when it was completely leased out, as it got appraised for $380000. I paid off first and second mortgages and used balance of money to buy three more properties. In few years I sold all of them and made $270000 profit because of creative financing. Most of the people who have made lot of money in real estate have become multimillionaires because of creative financing.

Lot of people are sitting in people ROTH IRA accounts at a very low interest rates and if you have a solid business proposition with collateral you can borrow money against those IRA accounts. Monthly payments on to the lender in his Roth IRA tax free account.

By Ashok of http://becomerichinfiveyears.blogspot.com



Finding Money For Your House · Investing In Real Estate – Invest In Your Own Home · Change Your Thinking: Think SAVING, NOT Spending! · Investments in Real Estate: Personal Experiences – Part 1 · Real Estate: Time To Move And Make An Offer! · Investments in Real Estate: Case Studies of People – Part 1 · Investments in Real Estate – Part 3 ·