Tougher loan requirements have made it difficult for first time home buyers to buy their first property. With the right circumstances, both parties can benefit from this arrangement. Loans from family or friends can help you fund your down payment, first mortgage, or a second mortgage. Some of the reasons you might want to use family and friends for financing include:
1) Paying Less Interest While Still Receiving Tax Deductions – You can negotiate a more favorable interest loan with family members then with a regular lender. Savings can amount to thousands of dollars over the period of the loan if you pay 1 to 2% less in interest points. If you handle the paperwork correctly, you can receive the same interest tax deductions as a traditional loan. Consult with your tax advisor for details.
2) Adjustable Payment Arrangements – With a private loan, you can negotiate a flexible payment schedule compared to a traditional lender. You can arrange quarterly payments and even work in a grace period with no payments due until years later. You can also renegotiate your payment schedule should you become unemployed and lose your job. A traditional bank won’t be so understanding.
3) No Points Or Bank Fees – Banks can easily gouge you with thousands of dollars for loan application costs and other points. Your family and friends will spare you these high costs.
4) Not Credit Score Dependent – Unlike a bank that will require you to have a perfect credit score, a family member will be less worried about your score if they trust you to be responsible in repaying the loan.
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6) Less Paperwork – With a traditional bank, you’ll have to complete a lengthy application form and present documentation to prove the validity of your income, assets, and monthly expenses before they even take a look at your mortgage application. If you get a loan from your family and close friends, you won’t be subjected to this amount of harassment.
7) Pick Up A Hot Deal – When you borrow from family and friends, you have the flexibility to fund and close a transaction quickly-thus allowing you to pick up a great deal from a time pressured seller.
8) The Physical Condition Of Your House Won’t Be A Priority – When you use a traditional lender to finance your house, there’s a high probability you’ll be forced to fix all major flaws before your transaction concludes. Family and friends can be more understanding and help you take advantage of a great deal on a fixer upper.
Are you searching for the perfect Newport Beach homes for sale? Check out these local Newport Beach Realtors to help you locate one.