Real estate is a solid investment, offering a stable source of income. Winning on the price of the rent or refinancing the housing, the owners entrust their property to the company.
Problems appear when you try to perform an Express Emergency Direct Cash Withdrawal procedure to relocate or buy a home on credit. And getting a loan isn’t bad if you read some Fit My Money reviews and analyze different lenders. But unlike a small unsecured loan, a mortgage is much more difficult to obtain. The main requirement is a down payment – part of the cost of the house, as a deposit.
Yet there are several ways to escape unwanted spending. Find out which strategies make it easier to buy real estate.
Why winning on housing is a promising prospect in 2021
Over 900,000 apartments are rented in Arizona and that’s almost 36% of the entire household. But generally the rents are very high and many low-income people cannot afford the rent prices. So the solution is obvious: buy real estate in Arizona.
There are 2 common ways to make money on real estate: renting out your home or reselling it while prices go up. Fortunately, both seem to be working these days.
Prices in the housing market are increasing year by year with a particular increase at the end of 2020. Even the pandemic has not changed this pattern, as was originally expected.
Investing in real estate is risk free, which is attracting more and more homeowners. Selling your home a few years later will make a profit anyway.
Another variation is to rent accommodation and get a monthly income. This decision requires regular renovations, control over tenants and careful choice of location. However, more and more Arizona citizens prefer to rent a home rather than buy it, which makes your business a forward-looking decision.
Renting accommodation is also quite expensive. What is the problem? Rent price for a 2 bedroom apartment in Arizona is over $ 1000. Through simple calculations, we know that a tenant should earn almost $ 44,000 per year or more than $ 21 per hour.
But official statistics show the minimum wage is $ 12 an hour and the average is just over $ 17.
That is why the demand for real estate is increasing. The number of tenants increased dramatically during quarantine, when young people do not leave their homes and stay with the whole family together.
Can I buy real estate without a down payment?
When buying a home on credit, you have to pay the deposit. This step shows your credibility and protects the seller from risk.
You’ll pay almost 20% of the home’s value – a decent amount, especially for an expensive property. And the APR will differ 2.5% to 3.3% in Arizona (depending on how long you pay it off).
On rare occasions, the percentage may drop to 3%. However, such an option is only available to low-income families.
Many buyers are looking for ways to avoid down payments. It is important to understand that the deposit is part of the value of a property and that you will pay that amount anyway. By avoiding deposits, you are simply stretching this process and avoiding big expenses at the start.
1. Home equity loan
If you already own an asset, use its value instead of a down payment. This is how it works:
- You apply for a home equity line of credit from your bank or private services.
- Your current property serves as a deposit in the agreement
- The loan amount represents 70 to 80% of the estimated value of your home
- The lender does not run any risk since the sum is protected by real estate. Thus, the borrower benefits from advantageous conditions and large sums of money.
Check your credit score beforehand – only borrowers with a good reputation will be able to receive enough money.
2. Owner financing
The so-called purchase mortgages are a type of mortgage cut between the seller and the buyer directly. This is a popular method in Arizona, which means that the parties to the contract do not use the bank as a mediator.
Such a decision entails higher risks for the seller since there is no compensation for non-payment.
How does this help avoid down payments? Most sellers demand the same terms as banks, but some homeowners are open to discussion. You can ask for comfortable conditions or no deposit. Certainly, every inconvenience for the seller results in a higher interest rate.
3. Personal loans
Private lenders are less demanding than national banks. To assess your reliability, they use a famous “rule of 3”: guarantee, credit score, ability to pay. Unlike them, banks are only interested in the deposit.
If you don’t have a property yet, you have no way of borrowing here because the risks are too high.
By working with private lenders, you can replace missing the first payment with high regular income and a good credit score. Provide the necessary information and persuade the lender of your reliability. It is a way to get a deadline and prepare the necessary sum once you start making money on the property.
4. Borrow from an acquaintance
Borrowing from friends is much cheaper than going to banks. You can discuss repayment terms, avoid interest rates, and ask for time limits in advance.
For example, you plan to rent the unit, but it takes several months to renovate the house and find a good tenant. Other lenders would not care about this issue and would ask for repayment in the first month, while knowledge allows for concessions.
5. Mortgage hypothesis
Some homeowners have large mortgage debts and feel unable to repay them under the current circumstances. Getting a property without a down payment is a great opportunity for you.
The buyer assumes all debts and agrees to make regular payments in place of the original owner. You still have to pay the difference between the original value and the number of debts.
However, it is much less than a down payment. A person gets the same mortgage, but without a down payment, which is a good advantage.
A down payment is a serious obstacle for property buyers. Few of them know how to escape this formality in Arizona.
You can take the seller’s mortgage or use the owner’s financing and persuade the owner to avoid paying the money. If there is no way to reduce the deposit, try reducing it or take out a profitable loan to make the payment.