Alternative Purchase Options And When To Use Them
If you’ve gone through the whole process of trying to buy a home without success, there are a couple of alternatives that do work with minimal risk to you in terms of fraud activities. This section will assume you have a down payment of some type and are simply needing more time to repair and/or establish new credit.
Since we know, typically, the housing costs go up long term, you may want to buy a home now at a set purchase price and finance later. The first thing we want to do, is define what qualifies as a home in which one can achieve a mortgage.
A home must be in livable condition, and should pass all county code requirements for its designated building type. When considering a property for purchase, look hard to insure the home has no obvious defects. Invest in a home inspection, however keep in mind a home inspection can run from $350.00 to upwards of $600.00 or more. Don’t forget to shop!
Some counties even offer independent contractors who will inspect a property for code compliance. Typically the cost of a code inspection is only $75 to $100 dollars. Well worth the investment. Contact your local building department or housing authority for details.
The second important thing to understand is that a home must be tied to the land. So a manufactured home in a trailer park is not eligible for a mortgage unless you will actually own the lot the home sits on. Just keep in mind, building AND land equal a mortgage.
Privately Held Mortgage
One solution to home buyers who are in process of repairing credit, but don’t want to rent while they wait, is finding someone selling a property using a privately held mortgage. Most times, these people will be ready to retire and wanting the long term security of a monthly income that holding a mortgage can provide.
Where would you look for them? The for sale by owner section of your local paper. Even those who have not considered this option as sellers, may consider it if you approach them in the right manner.
These transactions should be treated no differently than a regular purchase. You’ll want to insure you have a purchase contract with clear conditions. You’ll want to have an appraisal on the property done, possibly a home inspection, a home buyer warranty, independent title company etc etc. You may even wish to hire an attorney to manage the contract and closing. The only difference in this transaction is who will hold the mortgage.
This is a terrific solution for those with 10 to 20 % to put down. You can usually get a very competitive rate of interest as the seller gets to determine what the interest rate is.
If you find the rate of interest offered to high as a result of your present credit condition, negotiate a interest rate reduction for on time payments. Meaning you may start at 8.5% but after two years of on time payments, your rate of interest will be adjusted to 6% fixed. This can be a win/win for both parties because it reduces the probability of your refinancing at a later date for a improved rate of interest corresponding to your payment performance.
In any instance, always pay on the due date via check and keep copies of these checks for your records. If you do choose to refinance in one or two years, you will need these copies as part of your refinance application.