Home finance just isn’t what it used to be. If you have been following my articles, you know I’ve been preparing you for the situation that is developing in the housing market. In this article I will share with you three reasons why it may be advantageous for you to finance your own home sale.
First, most mortgage lenders are reeling from the effects of the historic levels of real estate foreclosures. Even though a national real estate market doesn’t actually exist, indications are it may have just been virtually created. This is actually more a result of wide spread business practices that are being modified and adjusted because of the problems they have caused.
Generally speaking, the home finance problems have been created by overzealous mortgage lenders that allowed home buyers to make purchases that were not likely to ever succeed. What initially began as a concern for the sub prime mortgage market has now made it’s presence known throughout the industry, including the highest levels.
This reality has caused the mortgage lenders to re-group, reconsider, and revise their previous underwriting guidelines and requirements. As you might expect, the so called pendulum has swung to the other extreme. That would be the extreme of caution and the associated paralysis of analysis.
Even though they are still in the lending business, many mortgage lenders are reluctant to make loans. It doesn’t matter whether you are dealing with a prime or sub prime lender, the thrill is gone because of so many bad loans to recover from. I guess we can call this phenomenon some kind of post traumatic disorder. The reality is, it is taking longer to process mortgage loans and there are more hoops to jump through.
The second reason you might want to consider financing the sale of your home is the tremendous amount of housing inventory in the marketplace. Some estimates suggest it will take at more than nine months to liquidate the existing inventory.
That depends on how well all of the elements fit together so houses can actually be sold.
One of the major elements is the amount of time it takes for sellers to realize that the sale prices are trending downward. Typically that trend will continue until the market determines the actual value of each property. Since most home sellers resist the idea that their property has actually lost value, it is difficult to say just how long this phase will last.
Some experts have reported more than a trillion dollars in specialty mortgages are set to adjust over the next two years. Unless dramatic actions are taken we are likely to see some huge additions to the foreclosures already in existence.
Additions of this magnitude will certainly drive the housing prices down further and faster.
Neither of the two reasons described is an issue you can control. As a matter of fact, right now no one appears to be in control.
The fact no one is in control of this housing fiasco is the third reason you may like the idea of seller financing your property. When you don’t have to worry about the source of home finance funds, one of your biggest worries is over. Seller financing actually puts you in control of the funding. With you in charge of the funding there is no need for you or your buyer to wait for lender approval. You become the bank.
Now, this is important. Since you are going to provide the financing for your home sale, you want to be very certain your loan will be repaid. You don’t want to be guilty of the same kind of misguided underwriting that has caused so much grief in the financial industry. That means you must focus on your buyer and his or her total package.
The total package includes considerations like the amount of the down payment, the credit score and profile, the ability to pay you, and their character. It would also be really great if there is an active savings account in place.