Creative Financing Solutions

BY SABRINA BLAIR

Director of Communications and Programs

With real estate, like many things in life, there are ebbs and flows. Sometimes the market is hot and interest rates are low. Other times the market is sluggish and interest rates are climbing. We have compiled some creative options for helping your buyers get into a house when the market is a challenge. To get more custom solutions for your clients, please contact a mortgage professional. You can find OCR Affiliates through our Resource Guide which was included with this issue in your mailbox or online at www.ocrealtors.org/rg.

Down Payment Assistance Programs

The best place to start when looking for creative ways to finance a home purchase is down payment assistance programs. Most of these programs are targeted at first-time buyers but if your buyer hasn’t owned a home in the last 3 years then they might also qualify. Your first stop should be www.downpaymentresource.com which is a search engine tool for all kinds of assistance programs. Orange County Mortgage Assistance Program (MAP) is another program worth looking into. MAP provides mortgage assistance up to $80,000 (not to exceed 20% of the purchase price) for first-time homebuyers in the form of a silent second mortgage loan program. You can learn more about MAP online at www.affordable-housing.org/ orange-county-mortgage-assistance-program.

Bonus Tip: Attend our class “Show Me the Money! A Masterclass on First-Time Buyer Programs” on April 25th from 10:00 am – 11:30 am for details on these programs and more. Register at www.ocrealtors.org/first-buyers.

Assumable Loans

An assumable mortgage is a home loan where the buyer takes over the seller’s existing mortgage instead of applying for a new loan. This could be a great option considering the sellers’ interest rate could be much more appealing than current rates. The bad news is not all loans are eligible. But FHA, USDA, and VA loans are eligible for assumption. The benefits of an assumable loan are obviously a lower interest rate which will save you money in the long run. You also may benefit from less upfront fees since you are not opening a new loan.

Temporary Mortgage Rate Buydowns

In some situations, you may be able to ask the sellers to pay a portion of the buyer's interest payments upfront. This would reduce the mortgage payments for the first few years of ownership. Alternatively, the buyers can reduce the mortgage rate permanently by using discount points. One discount point equals 1% of the loan amount and each point typically reduces the interest rate by around 0.25 percentage points.

Date Your Rate

If all other options fail, it’s suggested that buyers just “date their rate.” This means they accept the interest rate they are able to get now in hopes of refinancing for a better rate down the line. Interest rates will rise and fall so it’s a matter of time before interest rates will come down again, maybe sooner than you think.