 (Photo from one of one of our property renovation & design projects) My husband and I have been self-employed for most of our adult lives... Thus, getting a mortgage for property has always been a huge hoop-jumping endeavor for us! We started with a mobile home, and then worked our asses off (blog here) off to increase our taxable income each year in order to get conventional loans on stick-built property. Truth is, the more you work on your financial fitness, the more "lendable" you will be. And that's a good thing. Real Estate is generally a "pay to play" industry. Generally you need SOME income, and SOME down payment. However, I believe in making homes and real estate investments accessible to the average person, especially given the affordability crisis. So I am SO happy to report~ The following CREATIVE FINANCING OPTIONS are available today!!  #1: Seller Financing/Owner Carry/Rent-to-Own Sellers who are willing to hold the "note" occasionally pop up. This is most often possible when an owner is older and the property is completely paid off. They don't want a chunk of profit upon sale like most sellers because they would have to pay capital gains tax. Quick way to search these is For Sale By Owner in Zillow & Craigslist or search for homes that have been on the market 6 months or longer. In-depth way to do this is to pull a list from local property data. EXAMPLE: A woman in my investing group talked with her landlord, who was willing to sell the home she was renting to her at competitive terms & interest rate! Certainly worth a conversation...  #2: Pay Completely in Cash You can get a home with no mortgage whatsoever~mobile homes or land most often are the price point where this will work in Oregon, but many other areas of the country are cheaper for investment. This move is helpful to make improvements, build equity/cash flow, and gather power in your finances to get into your next deal. EXAMPLE: Purchasing a $40,000 mobile to live in and renovating it so it was worth 3x as much is how Steve and I got started! We were then able to use that increased equity to purchase stick-built property.  #3: DSCR/Commercial Financing If you purchase a property you plan to rent for at least 1 year, you can get approved for a loan based on the rental income of the property, not your own income. DSCR, or "Debt Service Coverage Ratio" loans, used to be expensive, 10% interest rate and up, but now the rates are about 7% with 15% down, 6.5% with 20% down, 6% with 25% down. Property must technically be a rental for the first year, but after that you can move in under those loan terms. EXAMPLE: A single family home that rents for $3000/month and has a $2500/month PITI(Principal, Interest, Taxes & Insurance) payment OR a duplex that rents for $6000/month rental income and has a $5000/month PITI payment will qualify for a DSCR Loan. The RATIO of rental income to PITI generally just has to be 1:1.  #4: 100% Loan Program New loans now exist where down payment funds are financed, like the Residential 100 program or USDA/VA loans. You still have to qualify for the conventional loan based on income but you do not have to bring a down payment because it is financed as a 2nd mortgage. EXAMPLE: If a home is cheap enough, a financed down payment bundled with the regular financing will work because the monthly payment will still be do-able. This strategy doesn't work as well with more expensive properties because your monthly payment gets too high to be practical.  #5: Down Payment Grant Programs If you have low assets, you may qualify for the IDA(Individual Development Account) program, which is a matching funds savings program. You put aside savings of $100/month for 2 years, and get $300/month back as a lump sum at the end of the term. This usually ends up being between $10,000 and $15,000 total, which can be great "seed" money for a first time homebuyer. EXAMPLE: I know many people who have gotten this grant in Oregon, including ourselves, 10 years ago! It is a viable program, especially for those who have patience and are starting with under $20K in assets(more than that disqualifies).  #6: Hard Money or Private Money Hard money and private money lending is most often used for "fix-and-flip" loans. Hard money lenders will offer you short terms at high rates, generally between 8 and 12% for 6 months on average. This is a great "bridge" loan option if you plan to do construction, fix and flip, or other renovation projects. Private money lenders tend to be friends or family who are able to give you a short-term loan. EXAMPLE: A woman in my investing group used a private money loan from a family member to completely renovate her duplex, so it was worth twice as much. She is re-financing to pull their initial investment out and pay them back. ~~~~~~~~~~~~~~~~~~~~~~~~ Whew! That's it for now. May all these Creative options give you HOPE, and if you have any specific questions please hit me up. For my real estate clients, I am always happy to open my ROLODEX to you and give you my personal recommendations of lenders! Of course, you should do due diligence and interview at least 3 loan professionals to decide which one is the best fit for you. Happy shopping!
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