Obtaining a home mortgage loan is substantially more difficult today than in previous years. Subprime lending practices allowed borrowers to take out home loans they couldn’t possibly repay. Within less than five years, more than 8 million homeowners were served with foreclosure notices.

Today, borrowers in need of home mortgage financing are met with tighter lending protocol. Mortgagors must possess high credit scores, positive credit history, and solid employment if they want to buy a house with borrowed funds. While these measures can prevent borrowers with average or poor credit from obtaining bank approval, alternative financing options exist.

One of the more popular home financing alternatives is seller carry back trust deeds. Using this type of financing; the seller acts as the lender for all or part of the purchase price. A real estate purchase contract is executed which records the terms of the sale.

Seller carry back financing gives borrowers the opportunity to establish credit or engage in credit repair strategies. Once credit scores improve, buyers apply for a home mortgage loan through conventional lenders. Contracts usually extend for two to five years. Once the seller carry back contract expires, buyers refinance mortgages through a bank or credit union.

Another popular home buying option is lease options. Rent-to-own contracts allow buyers to reside in the home and contribute a portion of rent toward buying the house. Sellers generally require buyers to provide a small down payment and apply the agreed upon portion of rent toward the purchase price.

Lease options usually last between two and three years. Contracts should be drafted by a real estate lawyer and include legalese to protect both parties in the event of default. Buyers usually lose all vested funds if they decide to not purchase the property at the end of the contract.

Some real estate investors and investment groups offer hard money loans to borrowers who cannot qualify for conventional home mortgages. Private lender loans can be quite costly and are usually used as a last resort. They are not intended for long term use and borrowers should strive to refinance into a conventional loan as quickly as possible.

Interest assessed on hard money lender loans often range between 10- and 20-percent, compared to 5-percent for home loans obtained through mortgage providers. Private money lenders often require down payments of 30- to 50-percent of the purchase price. Hard money loans are most commonly used to purchase real estate that will be sold quickly such as with house flipping or wholesaling.

The Federal Housing Authority offers home mortgage loans to those who do not meet bank lending criteria. However, in order to obtain FHA funding, borrowers must work with an approved mortgage lender and meet FHA loan criteria.

Borrowers are required to provide proof of income, source of down payment (savings, inheritance, gift, etc.), and a current real estate appraisal for the property they plan to purchase. FHA lending limits vary by state. Program details are available at FHA.com.

The Department of Housing and Urban Development (HUD) offers a variety of home buyer assistance programs. These government sponsored programs are available to low-income buyers and individuals working in public service professions such as teachers, police officers, and firefighters.

The current status of the real estate market has opened doors to exceptional home buying deals. Those who are financially prepared may find now is the best time to invest in real estate. It is important to realize there is much more to owning a house than making loan payments. Take time to conduct research to determine what types of financing options are available and calculate the costs associated with homeownership.

Author Bio: California investor, Simon Volkov, provides home mortgage financing information and resources, along with real estate investment and personal finance wealth building strategies via his website at www.SimonVolkov.com.

Category: Real Estate
Keywords: home mortgage, seller carry back financing, lease option, real estate investors, hard money loans