The Seller Can Help You Buy Their Home

If you and your family are ready now to buy your first home, but you're not sure you have enough cash stashed away, there are ways in which a home seller can assist you in buying his home. A competent Tampa Bay Realtor can review all of your options but here are a few examples.

FHA MORTGAGE WITH SELLER FINANCED CLOSING COSTS
An FHA mortgage requires as little as 3.5% of the purchase price as a down payment. These mortgages have been available for years. Your Realtor, working with the home seller and an FHA-approved mortgage provider, can structure a mortgage loan so that the seller pays all or nearly all of your closing costs. The seller cannot assist you with the 3.5% down payment, but can pay just about everything else at your closing. In the current market environment, many home sellers are willing to participate in this type of arrangement to get their home sold.

SELLER-PAID BUY DOWNS
There are many variations of "Buy Downs," Some are permanent, where the interest rate is reduced over the full life of the loan. Other buy downs are temporary, reducing your interest rate, and therefore your monthly payment, for the first 1 - 3 years. The most popular is what's known as a "3-2-1 Buy Down." Here's how it works. For the first year your rate is 3% below the market interest rate; the second year 2% below, and for the third year the interest rate you pay is 1% below the agreed-upon interest rate. This allows you to grow into your loan payments over 3 years. If you expect your family income to grow over that period by enough to cover the eventual cost, this may be an attractive option for you. "Buying down" your first 3 years of loan payments in this manner will cost the seller about 4.5% of the loan amount. Here is an example on the purchase of a home with a $225,000 mortgage with a fixed rate of 6.5%. The full monthly rate on this mortgage would be $1,422.15/month. Using a 3-2-1- buy down, the first year's payments would be $1,010.35, the second year's is $1,140.04, the third year's - $1,277.53, and then for the remaining 27 years, $1,422.15. The "buy down" of the first 3 years payments saved you, the buyer, over $10,000 in mortgage payments in addition to making your payments more affordable for those first 3 years.

There are other buy-down processes your Realtor can discuss with you. Another popular one is a 2-1 buy-down which works like the 3-2-1 program but reduces the interest rate for only the first two years.

SELLER FINANCING
Less frequently, but occasionally, there are sellers who own their home outright (no mortgage on the property) who will agree to assist you by holding your mortgage. In this case, you do not have to qualify through the normal bank financing route. In effect the seller, instead of a bank or other mortgage company, becomes your mortgage provider. Such a mortgage can be written with essentially any terms and conditions that you and the seller agree upon ranging from financing 100% of the purchase price to requiring a minimal or larger down payment, with or without a "balloon payment" at some point in the future, and for a term of 10, 15, 25 or 30 years.

Such private lenders frequently charge a higher interest rate and may try to use this approach to get the highest possible price for their property. So protect yourself by working with a competent Realtor who can make certain that you are not over-paying for the home you want.

The point of this discussion is this. if you'd like to buy a home now, one of these seller-assisted approaches may work for you. Don't be scared off because you don't think you have enough saved up yet. The price of homes and the interest rates are as low right now as they have been in a long time. Meet and discuss your options with a competent Realtor like Cheryl Stimac, a Tampa Florida Real Estate professional. Got questions about all this? Call Cheryl Stimac today at 813-263-6808 or email her at cheryl@cherylstimac.com

You may be closer to your dream of home ownership than you have dared to hope.