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How to buy a new home without bank qualifying and let the Government foot the bill.
How many of you would like to stop wasting money on rent or living in a house that doesn’t meet your needs? How many of you would like to OWN a new home regardless of whether you can qualify for bank financing in the troubled credit markets? For those who said YES, read on.
The federal government recently extended and expanded the home buyer tax credit program until April 30th, 2010. If you’ve been sitting on the fence about buying a new home or worrying that there is no way you can own a home because you can’t qualify for bank financing - worry no more. Included in the tax credit program are purchases using owner financing. So what is owner financing?
Simply put, owner financing is asking the current owner of the property to “be the bank”. Since most sellers on the market are fairly motivated to get their house sold (otherwise they would not be selling in a down economy) home owners are generally going to be far less demanding in terms of credit and income requirements. Does that mean that all sellers on the market are going to be amenable to “being the bank”? Unfortunately, no. In fact, most sellers don’t realize that setting up owner financing is even an option and the further reality is that most of them want to sell outright to avoid any future risk with the property (hint: Sorry Mr. Seller but I can’t make the payment this month and you need to pay your lender to keep the house from going into foreclosure). However, if you’re willing to be diligent in your search or work with a reputable company that specializes in owner financing, you can quickly and easily buy a new home without bank qualifying.
So what do I need to know in order to successfully purchase a home using owner financing? The first thing you need to understand is that you are actually buying the home and not setting up any kind of creative financing option such as rent to own or lease purchase. As in the case of a traditional purchase, you are executing a note or mortgage and as the home’s owner you are responsible for the maintenance and upkeep on the home as well as paying property taxes and home owner’s insurance. However, unlike renting, all amounts that you pay toward interest on the mortgage as well as for property taxes are fully tax deductible. Why is this important? Consider this; money you would otherwise pay for rent is paid with after-tax dollars, or money that has already had taxes withheld through payroll. Given that most mortgages are almost entirely interest for the first decade or so of the loan, the amount that you actually pay toward a mortgage is substantially less because you can actually change your payroll deduction the moment you own the house and bring home more money every month that would have been deducted through payroll and gone to Uncle Sam.
On the subject of Uncle Sam, why not let the government provide most of the down payment you’ll need to buy a new home with owner financing? Typically if you’re going to purchase a new home using owner financing the owner is going to want to see a substantial down payment, usually in the range of 5% to 10% of the purchase price (approximately $10,000 - $20,000 on a $200,000 home). After all, it’s their credit on the line if they are providing owner financing around a traditional mortgage in their name. But what happens if you don’t have $10,000 - $20,000 to put down? This is where a little bit of creativity comes in.
For a reasonable down payment a flexible and creative seller can sell you their home using owner financing. After closing, you send the appropriate documentation to the IRS and then use the tax credit received (it can be filed as an amended return and received within eight weeks) to finalize the down payment requirements to own a new home where the home owner is willing to be the bank. If you really want to leverage the good old government, I’d suggest using any tax returns you may have coming to you as well as the tax credit when you buy the house. All things considered, if you’re in a position to put $4,000 - $8,000 down up front from tax returns or personal funds, plus another $8,000 within eight weeks or so, you have now purchased a new home for you and your family and truly let the government foot the bill. Who says the best things in life aren’t free?
Be careful though. If you’re only half-serious about owning a new home and you don’t keep the home for at least three years you may end up in a situation where you have to re-pay the tax credit to Uncle Sam. Also, if not filed appropriately your tax credit disbursement can be held up with the IRS for months. Most title officers are going to be able to supply the correct documents and verification you’ll need to quickly and easily claim your tax credit. They’ll also usually charge in the neighborhood of 2% of the purchase price ($4,000 on a $200,000 house) to close the transaction. Closing vehicles such as an Installment Land Contract or Agreement for Deed are excellent tools if you want to avoid hefty closing costs, however, fewer people in the real estate community are familiar with their application and can provide this as an option.
Wasatch Rent to Own specializes in providing solutions to get you into a home regardless of your ability to get a bank loan. We currently have over 100 homes available between Utah, Salt Lake and Davis counties. If your intention is to buy a new home using some type of creative or owner financing it may make sense to speak with one of our owner financing experts first to avoid any pitfalls you might run up against and to feel secure that you are dealing with a reputable company engaged to fulfill your needs. Give us a call or sign up on our VIP Buyer List and we’ll make sure you end up realizing your dream of owning a new home.
Until next time – happy hunting!
Adam Loveridge Wasatch Rent to Own www.WasatchRentToOwn.com www.RentToOwnHomesUtah.com Phone: 801-505-9990 Fax: 801-505-9990 Welcome to Wasatch Rent To Own, a company with unique solutions to today's crazy mortgage market. We are one of the most professional rent-to-own companies around today. If you would like to buy a home, but can’t qualify for a conventional mortgage, you’ve come to the right place. We are real estate investors not real estate agents. Our goal is to offer our rent-to-own (or lease option) clients the best properties in Utah through our program, which will help them become future homeowners. Wasatch Rent To Own is partnered up with phenomenal group of mortgage brokers and a credit repair company who are leaders in the industry which enables our buyers to obtain a professional credit anaylsis so the buyers understand their credit report and credit history so we can determine what existing credit issues should be addressed now in order to secure the best mortgage possible to purchase a home in the future. Wasatch Rent To Own also has partnerships with select realtors, investors and property sellers which enables us to offer a extensive inventory of properties. By using our special financing, you can buy a home from us. It does NOT matter if you have bad credit, bankruptcy, late payments, judgments, liens, tax problems or charge offs, you can still buy one of our homes. It doesn’t even matter if you have verifiable income. We believe that *everyone* has a right to own their own home. We have nice homes in nice areas with great neighborhoods and excellent schools. Most of our homes are less than 5 years old and in near perfect condition. Only a few of them are fixer upper bargains. Many of these homes have beautiful new kitchens and master bathrooms, big master bedroom suites, and big fenced in yards for the kids and your pets. Most of them have big 2 car garages and plenty of storage. On this web site, I’m going to show you the simple steps you can take to buy a home. These aren’t difficult steps... they don’t take a lot of your time and, in fact, they can be pretty exciting... especially when you start looking for your new home. |
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