By John Hines
So you’ve searched the Internet day and night — Looked at hundreds of homes for sale — Filled out the forms at the bank to get pre-qualified only to find out that they won’t give you a mortgage. Perhaps your credit score isn’t high enough to fit into the underwriter’s new higher standards. They tell you to check back with them in a month or two “when things might change.”
Disappointed and disgusted you give up the idea of buying a new home in this lousy economy. But you know deep down this is really the time to buy when the chips are down and the prices are too. It’s the time you’ve been waiting for alright.
You’re put off by the Big Boys on Wall Street and the bankers messing the whole country up, killing your dream of buying a new home. Don’t give up! There’s hope at last of buying that new home after all without the bank you thought you needed.
Conventional mortgage lending is going the way of the audio cassette. The DVD replaced it. Movies can be rented on the cheap. The rules of the game are changing in this new economy. Banks have tightened up. Money is harder to get. Some banks are lending but not to you. Not now.
Mortgage rates for conventional loans may be near historic lows, but a sampling of mortgage makers in 20 states shows that only one in three mortgage applicants are being approved. The majority are for refinancing. Only about a quarter of all applicants are for purchases, according to bankers.
Owner financing is emerging as an answer to the financial crisis, and it just may be the way you finally buy that house. Homeowners who own their homes, condos and other property without a mortgage are able to sell their places using a first trust deed, also called a contract in some states.
Interest rates paid by the new purchaser are typically a bit higher than banks charge, usually around 1% more, but are negotiable.
Even Billionaire businessman Donald Trump, who amassed a fortune in real estate, has been hit by the banking crisis and consequently he has been unable to refinance his highly touted Taj Mahal Casino Resort in Atlantic City.
“As far as financing is concerned,” Trump told Larry King on CNN, “The only financing you should be thinking about is seller financing. If the seller won’t give you financing, don’t do it because the banks are not doing their job. They’re not providing financing for deals.”
Still, with the $8,000 tax credit for buyers who haven’t owned a home for at least the past three years, existing-home sales are rising and many are getting done through owner financing.
Some especially aggressive homeowners wanting to sell are using a less commonly used mortgage “wrap” to sell their homes, in which the owner is typically paid the mortgage directly on a monthly basis and then makes the payment to his or her bank. Sometimes the new mortgage is recorded in the new buyers’ name. Sometimes it is not depending upon state laws and banking regulations. These sales involve technical procedures best handled by a real estate attorney.