Monthly Archives: May 2018

Buying a House With Owner Financing

Many people that have either been turned down for traditional financing are turning to Rent to own or Owner Financing to buy a house these days. While the offers advertising the fact that “Bad Credit is OK” may be appealing. The motivation behind these offers often is not in the best interest of the people the customers that use it.

Let me explain. There are some easy ways to find out whether the person/company selling the house is interested in you actually owning the home or just making money off of you.

    1. If your credit is low, are they offering a service to help you build your credit or are they reporting your payment to the credit bureaus.

    1. If they aren’t, chances are they have locked you in a VERY high interest rate loan that you may never be able to refinance out of.

    1. Did they require a large down payment (5-10k) and above market payment for the house.

    1. This is sometimes done knowing full well that if you default they can keep your down payment, take back the house and sell it again.

  1. Have they set up a bank to refinance your owner financed loan once the seasoning period is over. Banks will only refinance a borrower who has owned a home for at least 6 months.

These are all reasons to be suspicious of the offer. So before you pursue owner financing or rent to own for the purchase of a house. Make sure you are not being set up for failure and you have a plan of action to get your credit in place to refinance the owner financed loan.

Home Loans For the Self-Employed

Being self-employed can be a beautiful thing because it allows for you to work when you want, the way you want, without anyone looking over your shoulder asking you when something will be done. While there is a lot of freedom and benefits of being self-employed, it can make some other things more difficult, such as securing home loans. If you are self employed and you would like to buy a home you should be aware that it may take you some time to find the right offer, or in some cases, any offer at all.

Home Loans When You’re Self-Employed

When you’re self-employed, many lenders are hesitant to lend to you because you cannot promise that you will have the same income every month. When a lender lends to someone with a “regular” job, they have some safety in knowing that the borrower makes the same amount of money each year or each hour. This allows them to see that the payment can be made, but the lender has to question this a bit more when there is not a salary or base hourly pay.

If you have been self-employed for more than two years, you will find that it may be a bit easier to get the financing that you need. If you have been self-employed for less than two years, it may be difficult, if not impossible, to get a conventional lender to help you out. If you have been self-employed for longer and you can show some stability through tax forms, you may be able to appease the lender.

The thing to keep in mind is that even if you can provide the lender with tax forms that show that you have a stable income you will likely be paying an interest rate that is two to three percentage points higher than someone else with the same credit standing and yearly income. This increase in interest on home loans for the self-employed is simply due to the fact that the lender feels that they have more risk with the self-employed.

There are some ways to get around this sort of problem. A lot of people choose to go with stated income home loans or they decide that they will simply assume a mortgage from someone else. These are viable options, assuming that you can do this, as they will help you get into a home without all of the problems that many self-employed people face.

While it can be more difficult for the self-employed to secure home loans it is not impossible. You should look for lenders that specialize in hard to finance loans or even in self-employment loans. When you deal with someone who does a lot of these loans they may have certain things that they do or require of you that will help you get the financing that you need without seeing a huge increase in interest rates. Don’t give up before you get started; just be aware that you may have to work a bit harder at getting home loans than the average person. Home ownership can be a reality for the self-employed; you just might have to be more creative about getting the loan that you need!

Unsecured or Line of Credit Business

The only difference between a bank unsecured loan and a bank line of credit is a line of credit is an approved amount, which can be activated during a future time usually by just writing a check. The rate of interest, and the terms are exactly the same for either type of loan. The local banks and their loan personnel usually do not have the financial expertise, or knowledge to approve a loan of this type, thus business finance brokers place most of these loans. These brokers have contracts with large national banks to allow the placement of these loans using previously approved underwriting standards. The common loan amounts are usually $100,000 to $250,000.

The requirements to be approved are fairly simple. Most banks use a combination of personal credit, and a Dunn & Bradstreet PayDex scoring. With score of 660 +, and 65 + respectively. The business type, number of years in business, and the sales volume determines the maximum loan amounts approved. Start up or existing business purchase are not eligible for this type of unsecured or line of credit loans, as the failure rate is too high.

Applicants search for firms that handle these types of loans should be careful not to pay any advance fees based upon a promise to provide a loan, as most of those firms are not credible, and experienced in that type of loan. Just as when you applied for a home mortgage, the broker may request a small deposit to cover the costs of any credit application, to cover their costs in the event that your firm does not qualify.

Once you have been preliminary approved, you should be ready to furnish some of the following types of information:

State Drivers License copy

Verification of banking accounts

IRS personal and business tax returns for last year or longer.

Business license or state incorporation papers.

Additional information upon request.

Signed Application, and Broker’s Loan Agreement.

The signed application should contain all of the pertinent information about you and your business, and the Broker Loan Agreement the cost of the loan, or points. It is not unusual for these loans cost to be from 4% to 7% of the amount of the loan or line of credit maximum, and must be paid upon funding or approval. In the event that the loan is approved, but refused by the applicant, most firms will charge a fee to cover their administrative costs.

Approval time for these loans can be from several days to weeks once the paperwork is presented to the underwriter at the bank. Most banks, since the loan is directly with them, will contact the applicant directly, if there are any additional questions or missing information. The same when the loan is approved, and the rate and terms set.

Bridging Finance

What does this concept mean at all?

The best bridging finance, or bridging finance loans, occurs when an individual business owner needs money between the sale of one asset and the purchase of another. In a perfect world, we would rather live debt free and we also would like one property to sell exactly at the same time we are buying another. This does not always happen because it is not a perfect world and here where the idea of looking for bridging finance company has to appear.

Bridging finance lender is a company or a person who is welling to offer you an asset-based financing that is lent in a very short term at a higher interest rate. In this case, also known as secured loan, the lender will charge a much higher interest, regardless of credit, because they need to make the deal worthwhile for their business. Six months is the usual amount of time for the average lender.

What would be the ideal strategy to adopt in this case?

Some money saving ideas can still be applied to these situations. You could pay the debt off earlier than the time allotted. And even though the money is meant for the purchase of the next asset, you can use it if you need to pay something else off that is either overdue or set at a high interest rate.

What is the #1 benefit of this concept?

There is a clause that is traditionally attached to the contract that a borrower will pay the debt off when the asset is finally sold. You might believe that it is better to just wait until your asset sells and then you can begin to the search for your next acquisition.

However; you may find the home that you have always wanted and searching for companies with moderate bridging finance rates may be the only answer to your situation.

If it fails out, what would be the next solution?

One of the best tips for saving money is to be sure that you can repay your short term loan within the terms of the contract and shop around for the best offer. If you have any doubt that you might not be able to repay the debt, look to other avenues to resolve the problem.

At the high interest rate that you will be charged, if you do not repay the debt on time, you may lose the new asset or any future business loans that you just acquired.

What is my last tip for you that you should not overlook?

One of the financial tips for young people is to shop around. Many younger people are just so grateful that someone was willing to help them that they will go for the first company that offers them a hand. This can be a big mistake, if one company is willing to extend you the money, there will be others out there and maybe even at a lower interest rate for the same commercial loans.