The Current Mortgage Bank By Default - The Home Seller
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The current mortgage and real estate debacle has resulted in a huge boom in the private lending business (Mortgages created by owner financing). Anxious house sellers are increasingly becoming the mortgage lender by necessity as lending institutions have moved in the opposite direction in lending practices. In the haydays of mortgage lending, mortgage companies would give you a mortgage, in many cases for 100% of the home’s value if you could just sign your name. Now, with the exception of government guaranteed mortgages (FHA, VA, USDA), you need twenty percent down, near pristine credit and 100% proveable income in the way of income tax documents. Unfortunately, these extremely rigid loan practices have left a lot of high quality, very low risk homebuyers out in the cold. This is particularly the case for huge numbers of self-employed home buying prospects who often have plenty of cash for a down payment ansd good credit scores. They just may not be showing sufficient taxable income in order to minimize (legally) their taxes. This aggressive approach to tax planning means they can’t get a a home loan. As a result, the homeowner has to step in to save their day.
Now, I realize that every homeowner may not have this option, but it could work great for many homeowners. {It is a great option for homeowners who have some equity in the property as opposed to those where the mortgage is equal to or greater than the value of the home.|It will work best for homeowners that have a lot of equity in their home where as it won’t work for people with little to no equity.} Interestingly, a lot of home sellers aren’t even aware that they can sell this newly created mortgage, which is a highly valued marketable financial instrument. They can even sell their private note to a mortgage buyer (also known as a note buyer) within 3 or 4 months after the home closes when the note gets a little “seasoning’. Many note buyers will be glad to turn the mortgage into a lump sum of cash. This essentially gives the seller an all cash deal and although the homeowner takes a discount on the note to sell it (a dollar today is worth more than a future dollar), the result is it moves the home fast, usually fetches top dollar and the property can usually be sold without any real estate commissions. The net result is almost always win/win.
So while the Government is showering trillions of our money at the banks, the banks still aren’t lending. Most of these banks are just stock piling this ultra cheap or free money or using it for mergers and acquisitions. As a result the homeowner is having to take control of their own situation, just as entrepreneurial Americans have always done.
