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Real Estate Financing - Ten Ways

By - 2005

Remember when real estate financing meant saving up enough to put 20% down on a house, and then getting a mortgage loan for the other 80%? Well, you can still do that, but there are many other options now. Here are ten of them to get you thinking.

1. Gift programs. Builders in some states fund foundations that give you a portion of the down payment, so you can get into a home with as little as 3% down payment from your own pocket. FHA and other lenders have so far approved of or allowed these programs.

2. No-doc and low-doc loans. Meaning no or low documentation requirements, you can find them through online banks. These are especially useful for those with bad credit but 20% to 30% to put down on a home. You don't even have to have a job.

3. FHA programs. The Farm Home Administration doesn't loan the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, depending on the particular FHA program.

4. The VA loan program. If you've been in the armed services, have a job, and can save two or three paychecks, you can probably get a home with a VA loan.

5. Land contracts. Called "contract for sale" and other names depending on the part of the country you are in, this just means you make payments to the seller instead of a bank, and get title to the property once you've paid in full. It's up to you and the seller to negotiate the down payment amount, interest rate, and the term of the loan.

6. Seller financing. Some banks will allow you to have only 5% into a home purchase, but will then only loan you 80%. The seller can take back a second mortgage from you for the other 15%.

7. State housing programs. Most states have some sort of financing help in the form of a loan-guarantee program or outright loans for low-income buyers.

8. Loans from family and friends. It isn't charity for a brother or a friend to lend you the money to buy a home. A 7% return looks awfully good if their money is sitting in the bank at 2%.

9. Manufactured home loans. Some manufactured-home companies are doing financing with 5% or less down for their buyers. They must feel their money is secure, but then a good modular on a piece of property is nothing like a mobile home on a rental lot.

10. Credit cards. This may seem risky, but you can use a low-interest credit card to come up with the down payment, especially if you can pay it off soon (with a coming tax refund, for example). Banks may not allow this, but you could combine this with seller financing.

Are there other ways to approach real estate financing? You know it. This is just to get you thinking.

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Houses Under Fifty Thousand | Real Estate Financing - Ten Ways