How to Buy a House home

Learn the basics

1.

The Basics

2.

How much home can you afford?

3.

The Down Payment

4.

The Loan

-

Assuming a Loan

-

Owner Financing

5.

Qualifying for a loan

6.

Understand Closing Costs

Do the groundwork

7.

Get your finances in order

8.

Clean Up Your Credit Record

9.

Establish Credit if you don't have any

The Process

10.

Find a Lender

11.

Evaluate the bank's offer

12.

Start looking at houses

13.

Get the Disclosure

14.

Make an offer / Sign a Contract

15.

Have the House Inspected

16.

Problems on the Inspection?

17.

Renegotiate the terms

18.

Appraisal, Survey, & Insurance

19.

Appraisal went through?

20.

Closing!

After the purchase
Avoding scams
More about Mortgages
How much loan can you get?
Figuring your monthly pmt.
15- vs. 30-year loans
Prepaying your mortgage
Understand Compound Interest
Private Mortgage Insurance
If you won't live long enough to pay off the mortgage
Other Topics
Renting vs. Buying: Which is better?
Paying cash vs. getting a loan
The Debt Ratio
Tax breaks are actually welfare for the rich
Other
Links to helpful sites
Fan Mail
Michael Bluejay's home page
Email Me

How to Buy a House

Easy-Qualify loan in Austin

0% down

Michael Bluejay (the author of the website) is offering loans to homebuyers in Austin, Texas. Here are the terms:

  • Your credit does not matter, but your ability to pay does.
  • No down payment is required, though you can make a down payment if you like, in order to lower your monthly payments.
  • Your monthly payment will be about 1.15% of the purchase price, including closing costs, taxes, insurance. (e.g., on a $100,000 home, the payments would be about $100,000 x 0.0115 = $1150/mo.).
  • The interest rate is 10%, and I do not require private mortgage insurance. We'll roll most of the closing costs into the mortgage, so they'll be part of your monthly payment, and you won't have to come up with a bunch of closing cost money at the time of the sale.
  • If you already have a high-interest mortgage and would like to refinance at 10% for 30 years, I can do that too.
  • These loans are available for homes in Austin, Texas only.

If you're able to get a bank loan you should do so, because the interest rate will be lower. My program is intended for people who cannot get a loan from a bank.

Note that you're not married to the higher interest rate forever. If you start fixing your credit with my credit repair instructions, you should have good enough credit to move your loan to a bank in two years -- and get a lower interest rate.

Contact me at
(512) 322-0638

or use the form below.

Owner Financing

« Back: Assuming a Loan «

» Next: Qualifying for a Loan »

It's rare that you'll be able to buy a house which the seller will finance for you. If that explanation satisfies you, then you can skip this section and go on to the next one. If you happen to find an owner-financing opportunity, you can always return to this page later. There's a lot to know about buying a house and spending time learning things that don't apply to you may only confuse and overwhelm you, and distract you from the things you do need to know.

Next topic: Qualifying for a loan


Owner Financing

(aka "Seller Financing")

You might be thinking, "Hey, could I just make payments directly to the seller instead of getting a mortgage? Then I wouldn't have to qualify for the mortgage." That indeed could be a good deal, except that owner-financed deals like this are rare, and are usually available only when the seller is unusually desperate, generous, or stupid.

Put yourself in the seller's shoes for a minute:

You own a $150,000 house, and you've got $110,000 left on the mortgage. If you sell it the regular way, you'll wind up with $40,000 in cash. (You'll get $150k from the buyer -- part down payment, part mortgage from the buyer's bank -- of which $110k will go towards paying off your existing mortgage, and you'll get the rest.) You could do a lot with that $40k: make a down payment on an even bigger house, travel the world, add it to your nest egg to retire, go to Vegas, etc.

But let's say you owner-finance the sale instead, in which you get a down payment from the buyer, and let him/her make payments to you for 15-30 years. First off, you won't be getting as much money up front -- $15k on a 10% down payment, or $30k on a 20% down payment. Second, you'd have to pay off the existing mortgage before you could sell it! So you'd have to pay your bank $110k in cash, before you get the measley $30k down payment. Most people don't have that kind of cash laying around.

But what if you own your house free and clear? That is, what if you've already paid off your 15- or 30-year mortgage so you didn't have to worry about coughing up a lot of money to pay off the loan all at once? Then in that case, you don't get your $150k all at once -- you have to accept the small payments that trickle in month after month from the buyer.

Why on earth would you do this? Well, probably, you wouldn't, unless you're really desperate to sell for some reason, or you don't understand what a rotten deal it is for you, or you're unusually generous.

So you see, it's usually not in the seller's interest to finance the house for you, which is why you'll rarely find houses that are owner-financed.

Of course there are exceptions. The reason that owners don't like to finance is that there's nothing in it for them. Here are a few cases in which there is something in it for them.

  • Financing as an investment. Sellers usually want to get all the money up front to either pay off their old mortgage and/or invest in something else. But anyone who's investing is just trying to get a small return on their money every year, and they could do that by owner-financing the home they're selling. If they sold the traditional way and cleared $150,000, they could take that $150,000, put it in the stock market, and hope to make 8 or 9% a year on that money. But instead they could seller-finance the home to you at, say, 7%. It's a smaller return, but unlike the stock market their investment is guaranteed and safe. As long as you make the payments, the seller definitely gets her 7%, while with stocks it's anyone's guess, and the investor could actually lose money in any given year. And if you don't make the payments, the seller can repossess the house and then sell it to someone else. (The seller could also simply rent out the house instead of selling, and not only get a return on her investment but also retain ownership of the house, but some owners don't like to deal with the hassle of leases, maintenance, and otherwise dealing with tenants.) Still, most sellers don't like to owner-finance, and most of them can't because they still have a lot left on their mortgage to pay off, and so they need the big chunk of cash up front.

  • You offer a higher interest rate. One way you might be able to convince an owner to seller-finance is to offer to pay a higher interest rate. Of course, you wouldn't make such an offer if you're able to qualify for a bank loan, but if you can't get a bank loan, then offering a higher rate directly to the seller might be what it takes to get you into the home you want. Also, once you've had the home for a year or two and your financial situation improves you might be able to move that loan to a bank.

  • The seller finances only part of the loan. Once I wanted to buy a home but I couldn't come up with the last $36,000. (I had no more cash left and couldn't get a bigger loan.) But I really wanted the house. So I asked the owner to owner-finance just that small part of the cost of the house, and I offered him twice the prevailing interest rate. He accepted. A year later I was able to easily move that loan to a bank at half the interest rate, so I only had to pay the higher interest for one year.

« Back: Assuming a Loan «

» Next: Qualifying for a Loan »

 

If you liked this site then you might like some of my other sites:

How to Find Cheap Airfare     How to Save Electricity     How to get listed & ranked well in Google

Entire site ©2006 Michael Bluejay Inc. • All information is "use at your own risk"   Email me