There are many financing options available for homebuyers. The three types most commonly used are third party financing, seller financing, and assumption of existing loans.
Third party financing is available through commercial banks, savings and loans, mortgage companies, mortgage brokers, credit unions, and government agencies. Be sure to shop around for rates and terms with third party institutions, as they can vary widely.
In seller financing, the seller agrees to accept a portion of the purchase price as a down payment and allows the buyer to pay the remaining purchase price over a period of time.
A third financing option is assumption of a loan, in which the seller transfers the loan to the buyer. This is advantageous when the original loan carries a low interest rate.
When shopping for financing, there are several factors you’ll want to consider. Ask for a written estimate of all fees and charges such as application fees, credit reports, origination fees, appraisals, and closing costs. Ask about the annual percentage rate, or APR, for your loan. By law, lenders are required to disclose the APR. Ask how long it will take for approval, what “lock-in” options are available for locking-in on a specific interest rate, which type of loan is best for you, and whether or not you can pay for your own property taxes and insurance.
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