Honest Minnesota, Wisconsin, and Iowa long distance movers will attest that the logistics that go into switching from one place of residence to another are not the only thing difficult about a relocation. Selling your current house is equally hard, if not harder.
If you can’t find a buyer that can easily qualify for a mortgage, closing the deal before your scheduled moving date is improbable. Fortunately, it is not much of a concern if your property is free and clear of a loan. Having 100% ownership of it gives you the luxury to accommodate a buyer with poor credit to make a sale and pocket more money than what your house is worth in the process.
There are three strategies you can explore to pull it off:
Pay Your Buyer
As a property seller, you can’t donate to increase the size of your buyer’s down payment since you are an interested party who will benefit from the sale. You may contribute money, however, to help pay for the closing costs.
The difference between the down payment and the closing costs is that the former is directly linked to the debt itself. As a result, it naturally impacts the interest and monthly payment. If the down payment is big enough, it can even prevent private mortgage insurance from being imposed by the mortgage lender.
Unlike the down payment, the closing costs have nothing to do with a person’s capacity to repay a mortgage. These are paid to the professionals who work to complete the real estate transaction. Many of them are typically charged by lenders themselves while others are used to pay third-party services.
If your buyer lacks adequate funds to cover your buyer’s closing costs, you can step in just to get it over it. Yes, it means your contribution will eat into the proceeds of the sale, but at least you will not have to worry about selling your house anymore.
Of course, there are limitations, and the maximum amount you can contribute depends on the type of home loan your buyer is taking out. Find out what mortgage in question is to know up to how much you can shell out for the closing costs.
If you are not in a hurry to turn your house into cold cash, you can act as the financier for your poor-credit buyer who can’t qualify for a mortgage yet. Rather than giving the other party money, both of you sign a promissory note and forwards the home loan (or deed of trust) with the local public records authority. The mortgage is amortized over 30 years, so your buyer pays you monthly as usual but at a higher interest rate to offset the risk you have to take.
After five years, the other party is expected to make a balloon payment to pay off the remaining principal. The idea is after 60 months, your buyer’s credit should have improved enough to refinance the mortgage successfully.
Be a Landlord
A less risky approach is letting your buyer rent the property for the time being based on a mutual agreement that the other party will pull the trigger on the purchase within a certain time in the future. The logic of this option is to help your buyer save up for the down payment because portions of the monthly payments are credited against the house price.
Moving without the baggage of a mortgage will give you a ton of flexibility when it comes to selling your house. Each of the said strategies has its own set of pros and cons, so tread lightly to avoid all pitfalls and maximize their merits.