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Jim Johnston, Sr. Consultant, CRS, CRB, GRI

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Ways Of Financing For You

?WOFFY?

 


1.      BLEND ? Balance of existing loan is extended to the buyer at a rate higher than it was originally written, but lower than the current rate charged by lenders.

2.      Necessary additional money is extended at current rate.  The interest charged on the ?old money? at the lower rate and the interest charged on the ?new money? at the higher rate ?blend? into an average rate considerably lower than the current rate.

3.      BUY DOWN ? This technique gives the buyer a ?below market? interest rate for several years because the seller uses some of his proceeds of the sale to reduce the interest rate charges currently.  This method of financing can reduce your rate usually anywhere from 2-4% for the initial years of the loan.

4.      ADJUSTABLE RATE MORTGAGE ? This loan is popular among lending institutions.  The rate is tied to an index and changes as the index does.  As rates rise, the payment rises, usually tied to a limit; if rates fall the payment MUST fall accordingly.

5.      VA/FHA ? VA: This loan is guaranteed by the Veterans Administration.  Maximum amounts allowed have been raised to make it realistic option in our area.  It allows the veteran to purchase a home with little or now down payment.

FHA: This loan is administered by the           Federal Housing Administration which insured long term, low down payment loans by FHA-approved lenders.  A great way to buy a first home.

6.      CONTRACT SALE ? This is a common method to secure a home when bank rates are high.  The seller, in effect, BECOMES the bank and, after receiving a down payment, agrees to finance the buyer at lower rates for a period of usually 3-5 years.  At the time the contract expires (3-5 years later), the buyer must secure financing and pay the seller in full.  Title to the property does not pass to the buyer until this ?postponed? indebtedness has been satisfied.

7.      SECOND MORTGAGE ? The second mortgage is utilized when a purchaser when a purchaser is short of funds to complete the transaction.  The ?second? could be in the form of a down payment, of the difference between the down payment plus an existing mortgage and the full purchase price.  A second mortgage is available through a lender or may be negotiated with a seller who offers a second mortgage.

8.      INTERIM FINANCING SECOND MORTGAGE ? You can increase the amount borrowed on the house you intend to sell up to 80% of the current appraised value in order to buy your new home.

9.      GRADUATED PAYMENT MORTGAGE ? This loan allows you to set a ?graduation period? beginning with loan payments less than they would normally be for the amount borrowed, then increasing gradually, as your income increases, leveling off after the ?graduation period? for the remaining life of the loan.

10.  LEASE/PURCHASE ? This is an agreement to rent the home for a period and, at the conclusion of the rental period, to purchase the home.  Usually this type of agreement provides that a specific portion of the monthly rental payments will be applied to the purchase price of the home.

11. PURCHASE MONEY FIRST MORTGAGE ? The seller agrees to be the bank for the purchaser for a period of time.  The difference from the Contract Sale is that the seller will convey title to the new buyer immediately at closing.

These are only the most common forms of ?non-conventional? financing used in today?s real estate markets.  More creative types are announced almost weekly by various lenders in the area.

Further methods can be ?custom made? for buyers and sellers by combining features of two or three of the above mentioned loans.

The point is this: few buyers are actually paying the extremely high interest rates that are quoted almost daily in the press.  Today?s buyers generally pay 4.7% less than the ?quoted rates? because they utilize a WOFFY that meets their ?personal? financial requirements.

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