Understanding Your Options
Author: Paul Pratt
Author: Paul Pratt
The financing world can be intimidating for most. By
understanding the different types of loans available, you will
not only have more confidence going into the deal, but more
importantly you will get the loan that is perfectly suited to
your needs.
FINANCING OPTIONS
There are numerous financing options available. The following
are loan programs most commonly used by investors:
Unsecured loans: Unsecured loans do not require collateral (for
example, credit cards).
Conventional loans: These are loans given by conventional
lenders that require no government guarantees or insurances.
These loans include your common fixed-rate mortgages, ARMs, and
fully amortized and interest-only loans.
Government loans: Government loans such as FHA, VA, and FSA
provide financing more easily for first-time home buyers with
smaller down payments and lower income requirements. Lenders
are able to provide these loan programs due to the insurance
that the government provides. The government guarantees a
certain amount of payment to the lender of these loans if the
borrower were to default.
Seller financing: Seller financing is when a seller allows the
buyer to make payments to him for the purchase of a property
rather than requiring the buyer to obtain bank financing to pay
him in full at close.
"Subject to" loan: When a seller sells his property without
paying off his existing financing, the buyer purchases the
property "subject to" the existing financing. The buyer makes
his payment to the seller, and the seller continues to make his
to the lender.
Construction loan: Construction loans provide the financing the
borrower needs to build a property.
Home Improvement Loan: Home improvement loans are equity loans
that the lender grants for the purpose of home repair or
remodeling.
Commercial Loans: These loans provide financing for commercial
property. Commercial properties are properties used for places
of business that are zoned for commercial use or residential
properties with five or more units.
Lease Option: A lease option is when a seller leases his
property to a prospective buyer with the right to purchase it
at a later date for a predetermined price.
HELOCs: Home Equity Lines of Credit are revolving loans that
are secured by the equity in the borrower's property. A
revolving loan allows the borrower to re-borrow the funds that
he has paid off.
Home Equity Loan: A home equity loan is secured by the equity
in a borrower's home. Home equity loans, with regards to lien
priority, can be in first position, second position, third
position and so on.
80/20: An 80/20 loan is where the buyer obtains two loans at
the same time to finance one property: an 80-percent first
mortgage and a 20-percent second mortgage.
Hard Money: Hard money lenders don't usually have the same
strict qualification guidelines that traditional lenders do.
However, they charge enormous fees and interest rates.
Assumable: Assumable loans are loans that permit the borrower
to take over the existing financing on a property rather than
taking out a new loan. There are two types of assumable loans:
freely assumable and qualified assumable. Freely assumable
loans are very rare. They do not require that the buyer go
through any qualification screening to take over the loan.
However, the seller, or original borrower of the loan, is
responsible if the buyer who assumes the loan defaults. A
qualified assumable loan requires that the buyer go through the
same qualification requirements that he would have to in
acquiring new financing. Once qualified, the loan is put in the
buyer's name, and the seller is removed from any further
obligation to it.
Private Money: Private money lenders are individuals who are
willing to lend their own personal money.
Portfolio Loan: These are loans that do not meet the purchase
requirements of the secondary market. Lenders who are willing
to create these loans are a jewel for an investor. Because the
lender isn't going to sell the loan, he doesn't have to abide
by secondary market criteria. Often the lender will custom
tailor the loan to fit the investor's needs.
Simultaneous Closing: A simultaneous closing is when a buyer
closes on a property he has agreed to purchase and then closes
on the resale of that property to another buyer for a profit,
all in the same sitting.
Assigning Contracts: When a contract lists the buyer's name or
Assignee as the purchaser, this gives the buyer the right to
assign the contract to another buyer. Investors can turn
profits assigning contracts to other investors for a profit.
About The Author: Paul constructs personalized investment plans
that maximize profits and realize financial dreams. If you are
ready to claim your success and learn what only the
ultra-prosperous know, begin by going to
http://www.myreiteam.com/link.html?promotion=trez, and
capitalize on the real estate revolution.
understanding the different types of loans available, you will
not only have more confidence going into the deal, but more
importantly you will get the loan that is perfectly suited to
your needs.
FINANCING OPTIONS
There are numerous financing options available. The following
are loan programs most commonly used by investors:
Unsecured loans: Unsecured loans do not require collateral (for
example, credit cards).
Conventional loans: These are loans given by conventional
lenders that require no government guarantees or insurances.
These loans include your common fixed-rate mortgages, ARMs, and
fully amortized and interest-only loans.
Government loans: Government loans such as FHA, VA, and FSA
provide financing more easily for first-time home buyers with
smaller down payments and lower income requirements. Lenders
are able to provide these loan programs due to the insurance
that the government provides. The government guarantees a
certain amount of payment to the lender of these loans if the
borrower were to default.
Seller financing: Seller financing is when a seller allows the
buyer to make payments to him for the purchase of a property
rather than requiring the buyer to obtain bank financing to pay
him in full at close.
"Subject to" loan: When a seller sells his property without
paying off his existing financing, the buyer purchases the
property "subject to" the existing financing. The buyer makes
his payment to the seller, and the seller continues to make his
to the lender.
Construction loan: Construction loans provide the financing the
borrower needs to build a property.
Home Improvement Loan: Home improvement loans are equity loans
that the lender grants for the purpose of home repair or
remodeling.
Commercial Loans: These loans provide financing for commercial
property. Commercial properties are properties used for places
of business that are zoned for commercial use or residential
properties with five or more units.
Lease Option: A lease option is when a seller leases his
property to a prospective buyer with the right to purchase it
at a later date for a predetermined price.
HELOCs: Home Equity Lines of Credit are revolving loans that
are secured by the equity in the borrower's property. A
revolving loan allows the borrower to re-borrow the funds that
he has paid off.
Home Equity Loan: A home equity loan is secured by the equity
in a borrower's home. Home equity loans, with regards to lien
priority, can be in first position, second position, third
position and so on.
80/20: An 80/20 loan is where the buyer obtains two loans at
the same time to finance one property: an 80-percent first
mortgage and a 20-percent second mortgage.
Hard Money: Hard money lenders don't usually have the same
strict qualification guidelines that traditional lenders do.
However, they charge enormous fees and interest rates.
Assumable: Assumable loans are loans that permit the borrower
to take over the existing financing on a property rather than
taking out a new loan. There are two types of assumable loans:
freely assumable and qualified assumable. Freely assumable
loans are very rare. They do not require that the buyer go
through any qualification screening to take over the loan.
However, the seller, or original borrower of the loan, is
responsible if the buyer who assumes the loan defaults. A
qualified assumable loan requires that the buyer go through the
same qualification requirements that he would have to in
acquiring new financing. Once qualified, the loan is put in the
buyer's name, and the seller is removed from any further
obligation to it.
Private Money: Private money lenders are individuals who are
willing to lend their own personal money.
Portfolio Loan: These are loans that do not meet the purchase
requirements of the secondary market. Lenders who are willing
to create these loans are a jewel for an investor. Because the
lender isn't going to sell the loan, he doesn't have to abide
by secondary market criteria. Often the lender will custom
tailor the loan to fit the investor's needs.
Simultaneous Closing: A simultaneous closing is when a buyer
closes on a property he has agreed to purchase and then closes
on the resale of that property to another buyer for a profit,
all in the same sitting.
Assigning Contracts: When a contract lists the buyer's name or
Assignee as the purchaser, this gives the buyer the right to
assign the contract to another buyer. Investors can turn
profits assigning contracts to other investors for a profit.
About The Author: Paul constructs personalized investment plans
that maximize profits and realize financial dreams. If you are
ready to claim your success and learn what only the
ultra-prosperous know, begin by going to
http://www.myreiteam.com/link.html?promotion=trez, and
capitalize on the real estate revolution.
