Financing Tips To Consider When It Comes To Purchasing Propertoess To Reduce Downpayments
Today’s property investors are constantly looking for mortgage programs that offer flexibility and convenience. One of the most commonly sought after programs that many people seek are zero-down loans and loan programs that require a low down payment. Remember that cash is king in the game of real estate investing, it gives you the ability to capitalize on opportunities faster and do emergency repairs when things pop up, so if you can acquire properties while limiting the impact on your cash reserves, it is worth serious consideration. In this post we’re going to take a look at some of the things you can do to minimize or avoid paying a down-payment.
1) Piggy Back Loan
One of the ways in which a lender can assist a borrower with little or even no down payment is to offer them what’s commonly referred to as a ‘piggyback loan.’ In this type of arrangement, the borrower would receive a mortgage loan that equates to 80% of the property’s purchase price as well as a second mortgage loan that equates to 23% of the property’s purchase price.
2) Government Funded Loan Programs
If you belong to a low income family or if you are currently serving/have served in the military you may be able to qualify for a government funded loan program. Typically these loan programs allow the borrower to become eligible for a down-payment assistance program or a zero-down loan.
3) First Time Buyer Programs
If you have never purchased a property before, you could be eligible for what’s known as a special ‘first-time-buyer mortgage program.’ These programs were established by the banks themselves, to assist individuals who have never purchased a property before. However, in order for you to be eligible for a first-time-buyer program, one of the following situations needs to apply to you:
* You filed for bankruptcy.
* You are self-employed.
* You were previously turned down by another mortgage company.
* You do not have a sufficient amount of documented funds to use for your down payment.
* You have never purchased real estate property before.
* You have not purchased a home within the last 3 years.
* You have no credit/bad credit.
4) Available Cash
One of the ways you can receive a no-money-down loan or be qualified for a down payment assistance program is to increase your available cash. Many financial experts proclaim that you should attempt to increase your liquid cash as much as you can, before you apply for a loan. One way you can do this is to essentially liquidate some of your assets such as stock holdings and bonds. Often times, lenders will overlook blemishes on your report if you can prove that you have enough available cash to cover at least two months of debt payments.
5) Private Mortgage Insurance (PMI)
If you are qualified, you may also be eligible for what’s known as ‘private mortgage insurance’. With the assistance of private mortgage insurance, you can make down payments that are as low as 3% as opposed to the typical 20 – 25% that’s usually required. Additionally, while it may be true that you will have to pay into this type of insurance alongside with your loan from the bank, once your mortgage balance goes below 80% of the property’s value, you will be able to cancel the private mortgage insurance.
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