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What is Creative Financing in Real Estate?

Creative financing in real estate refers to alternative methods of financing a property purchase that deviate from traditional lending methods, such as obtaining a mortgage from a bank. Examples of creative financing include owner financing, lease-option agreements, and using a wrap-around mortgage. These methods can be useful for buyers who may not qualify for traditional financing, or for sellers looking to sell a property quickly. However, they can also be risky and may not be suitable for all parties involved. It is important to consult a qualified real estate professional or attorney before entering into a creative financing arrangement.


What is Subject-To Financing?

"Subject to financing" is a type of creative financing in real estate where the buyer agrees to take over the existing mortgage on a property, rather than obtaining a new mortgage from a bank or other lender. This means that the buyer will become responsible for making the remaining mortgage payments, but the seller remains responsible for the mortgage until the sale is complete. This type of financing can be beneficial for buyers who may not qualify for traditional financing, but it can also be risky for the seller. If the buyer is unable to obtain financing or make the mortgage payments, the seller may be left with a property that they cannot sell and a mortgage that they cannot afford to pay. It is important to consult a qualified real estate professional or attorney before entering into a subject to financing agreement.


What is an Assumable Loan?

An assumable loan in real estate is a type of loan where the borrower has the option to transfer the loan to another borrower, typically in the case of a property sale. This means that the new borrower can take over the existing loan and its terms, rather than applying for a new loan with different terms and potentially different interest rate. This type of loan can be beneficial for buyers because they can assume a loan with a lower interest rate than what is currently available in the market. This type of loan is also beneficial for sellers, as it allows them to transfer the loan to the new buyer, which can make the property more attractive to potential buyers. However, not all loans are assumable, and the lender may require the new borrower to qualify for the loan under the current credit and income guidelines. It's important to check with lender whether the loan is assumable or not.

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