MANY ROADS LEAD TO HOME

The current real estate market is extremely competitive, and if you are ready to buy a new home, you must be prepared to use whatever financing route gets you to the negotiation table. In many areas, the most desirable properties make a fleeting appearance on the multiple listings and are snapped up by hungry buyers in less time than it takes to say, “Sold”. Buyers with creative financing options have an advantage.
First, a word to the wise – be ready to buy without adding contingencies to the sale. In a very active market, making the purchase deal contingent upon selling your existing home will increase the likelihood that the homeowner who can choose among multiple offers will sell the house to someone else.
As soon as you decide to purchase a home, get pre-approved by a lender for a specified loan amount. If interest rates are inching upward, ask the lender to lock in the interest rate, points and other fixed costs of the loan for a long enough period of time to complete the purchase. Get the rate lock “on application” in the form of a written agreement that states the initial lock date, lock period, lock cost and options to extend the lock.
When vying for million-dollar properties, many buyers with cash tied up in high-return investment accounts need ready options for financing large percentages of the mortgage. One option is the adjustable rate mortgage loan (ARM), which now offers rate caps limiting the amount the interest rate can increase in any given year and during the life of the loan. The ARM allows the borrower to avoid paying the premium associated with the higher interest rate on a 30-year, fixed loan. If you suspect that you may decide to move in a few years, an adjustable rate mortgage that is less expensive than a fixed-rate mortgage is probably a good financing option.
Interest-only loans come in a variety of packages that in general allow borrowers to pay only the interest on the loan for a designated period. The principal can be paid off at any time. Sometimes buyers with big yearly bonuses will pay an entire year’s interest up front. Another type of loan is the hybrid, which combines a 15 or 30-year fixed portion with an interest-only portion. A pledged-asset package allows affluent but temporarily cash-poor borrowers to promise assets like mutual funds, CDs or a stock portfolio in place of a down payment.

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A bridge loan is a strategy for purchasing a new property while you’re in the process of selling your current residence. Using your existing home as collateral, you get a bridge loan for three months to five years to use as down payment for your new home. When you sell the old home, you pay off that mortgage and the bridge loan. You can also apply for a second mortgage or equity loan to accomplish the same goal. Bridge loans are more expensive, and your credit must be excellent to qualify. Talk to your personal advisor about creative financing options for your unique circumstance. Dave Wallace is the President of Alliance Realty, Inc. in Ventura. He can be reached at (805) 644-1111 or email davewallace@start-packing.com.