Special Property Financing

The non-traditional, special types of property financing are:

Lease option/purchase: It is like a short or long-term lease that gives the buyer the option to buy the property anytime until the lease ends for a pre-determined sales price. The buyer pays the current monthly mortgage payment to the mortgage company and pays the difference between the pre-determined sales price and the mortgage balance at the beginning of the lease to the seller. If the buyer does not have sufficient money for the down payment, the owner can defer the difference until closing, carry a second lien, or request an option fee. The option fee, or down payment, is typically non-refundable unless the buyer buys the property within the lease term. If the buyer pays the down payment at once, he usually only has to pay or finance the balance at the time of closing.

Owner/seller financing: According to this type of property financing, the seller acts as the bank and finances the difference between the sales price and the down payment. Most sellers expect to receive at least 10 percent of the price as a down payment in order to pay closing costs and 1 to 2 percent above the going interest rate as the interest rate for the loan. The loan goes from 15 to 30 years with pay off within 5 to 10 years.

Non-qualifying assumption: This special type of property financing occurs when the buyer assumes the mortgage of the seller and pays the difference between the agreed sales price and the balance to the seller at closing. A true non-qualifying assumption loan is becoming harder to find, as it had to commence on or before December 1989.

Qualifying assumption: This type of financing is similar to the non-qualifying assumption, but the buyer must qualify with the seller's mortgage company in order to assume the mortgage balance. Qualifying requirements may differ from bank to bank, but they are usually similar to the guidelines set through traditional financing.