New mortgage creative real estate financing technique #1 works well when the seller owes nothing on the property or when the amount the seller owes is not greater that 40% of the value of the property; however, you must have a flexible seller who is willing to help finance the property.
For example, assume the seller of a $50,000 house has an existing loan of $12,000, is looking for a $15,000 down payment, and is willing to carry the financing for the balance of $23,000 ($50,000 less $12,000 less $15,000). Simply obtain a new first mortgage for $27,000, which can pay off the existing $12,000 mortgage and give the seller $15,000. Next, give the seller a second mortgage in the amount of $23,000. The $27,000 first mortgage plus a $23,000 second mortgage gives the seller his of her total asking price of $50,000.
A seller who may be initially reluctant to accept this offer may ultimately agree to accept an offer with more cash up front. For example, obtain a new home loan in the amount of $35,000, giving the seller an $8,000 larger down payment than expected, or a total of $23,000 ($35,000 new mortgage proceeds minus $12,000 old mortgage pay-off).
Some sellers have been known to join the buyer in signing a note and mortgage at the bank. If the buyer does not have sufficient credit to get a new mortgage , the seller, in effect, loans his or her credit to the buyer.
| Example Summary Technique #1 | |
| Pay Off Existing Loans & Provide Down Payment Money | |
| What You Need To Begin: | |
| Good Credit Flexible seller to finance property | |
| Summary Of Terms: | |
| Asking price | $50,000 |
| Existing price | $50,000 |
| Required down payment | $50,000 |
| Loan extended by seller | $23,000 |
| Procedures: | |
| Obtain new first mortgage | $27,000 |
| Pay off mortgage | $12,000 |
| Give balance to seller | $15,000 |
| Obtain second mortgage from seller | $23,000 |
| Results: | |
| The seller receives total asking price and entire down payment needed. | |
| The buyer has a creative no money down deal. |
| Specific Situations to Apply Technique #1 |
| The Property (has or is) |
| Property Offered Below Market |
| Low Mortgage, High Seller Equity |
| Extra Lot or Personal Property |
| Owned Free and Clear No Mortgages |
| Low Interest Assumable Mortgages |
| Existing 1st or 2nd Mortgage Private |
| Unused Room (s) that Could Be Rented |
| The Buyer (has) |
| Cash for only part or Down Payment |
| No Cash at All |
| Lump Sum Cash Due Soon |
| Poor Credit |
| You Know People With Cash to Invest |
| The Seller (has) |
| Outstanding Financial Obligations |
| Must Sell Immediately |
| Will Rent or Sell |
| Moving Out of Area |
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