Creative Financing 101 » down payment

What Kind of Down Payments Are Required in Seller Financing Purchases?

Jamie Beck — Thu, 02 Apr 2009 03:05:30 +0000

Seller financing continues to grow in popularity as banks tighten requirements. One question that many potential buyers ask is: “How much will I need to put down in a seller financed deal?”

In the current market, most sellers expect that buyers looking for financing will bring less cash to the table than required for a conventional loan. However, they are also concerned that a buyer without any financial stake in the property will bail if the value of the home continues to decrease.

Smart Money reports:

” In today’s market many banks have returned to asking for 20 percent down; offer less and you’ll probably have to pay for private mortgage insuranc, which adds up to half a percentage point to the loan. In seller financing, the buyer can put down less than 20 percent — without the PMI. Still, says real estate attorney Jon Goodman, of Boulder, Colo., “the buyer needs to have skin in the game — the more, the better.” Homeowners will typically want a down payment of at least 10 percent as protection against default.”

If you know where to look, it is possible to take over payments with nothing down. However, in most of these cases you’ll be asked pay more for the property than it’s current value.

See Also:

Seller Financing Guide

Seller Financing Step-by-Step

Can I Make a Lower Down Payment on an FHA Loan?

Jamie Beck — Fri, 27 Feb 2009 05:39:09 +0000

Now that most lenders require a mandatory 20% down payment, potential borrowers are frantically searching for alternatives. Fortunately, one of the best ways to make a small down payment is relatively easy: take out an FHA insured loan.

The FHA (Federal Housing Authority) is a government agency designed to help citizens purchase their own homes. While they do not give loans directly, they do insure loans from traditional lenders. Most major banks and mortgage brokers can help you take out an FHA loan.

The down payment on an FHA mortgage can be as low as 3.5% – in today’s market that’s outrageously low. Generally, FHA loans have rates comparable to other mortgages, and their fees are often lower. However, borrowers must pay monthly mortgage insurance fees.

More info on FHA loans can be found here:

Answers to Common FHA Mortgage Questions

FHA Mortgage Guide

FHA Loans Step-by-Step

Low Down Payment Options

Jamie Beck — Fri, 30 Jan 2009 23:08:45 +0000

When I purchased my home in 2005, there were tons of options for borrowers who couldn’t bring a down payment to the table. In fact, it was possible to take out a mortgage without putting any money down or even submitting documents (a no-doc mortgage is based on a borrower’s credit score alone).

But, these days are over.

Now, lenders want to make sure that a borrower has some stake in the property. Without putting a down payment on the table, it’s easier for a borrower to let the home slip into foreclosure. Basically, the homeowner feels that there’s not much to lose.

It’s practically impossible to find a no down payment mortgage in today’s market, but many homeowners are still able to take out FHA mortgages with only 3% down. That’s much more affordable than the 20% generally required for traditional loans. FHA (the Federal Housing Administration) is a government organization designed to help Americans own their own homes. They’re more flexible about qualifications, although borrowers still have to prove a lot more now than they did a few years ago.

To learn more see: FHA Mortgage Guide.