Seller offers incentive with 2nd-mortgage help

REAL ESTATE MAILBAG

March 13, 1994|By Michael Gisriel

Q: My husband and I are renting a house in Westminster with the option to purchase it. The owner of the house has offered to take back a second mortgage for part of the purchase price if we exercise our option and buy the house. How will this help us get a first mortgage to purchase the house?

K. Houck, Westminster

A: The seller's offer to take back a second mortgage for part of the purchase price will help you get a first mortgage for the house you are now renting.

Homebuyers need to borrow from 90 percent to 95 percent of the purchase price of a house in the form of a first mortgage from a lender in order to buy a home. Saving enough money for a down payment or deposit is probably the greatest obstacle for first-time buyers. Your seller's part of the purchase price will, undoubtedly, get you over this obstacle.

Ask the seller if he would take back a 20 percent to 25 percent second mortgage; this would help you even more. Most mortgage lenders would jump at a chance to make a first mortgage for only 75 percent to 80 percent of the purchase price, assuming you have decent credit. The first mortgage lender's risk of loss decreases when there is a 20 percent to 25 percent down payment.

Most lenders will allow you to count the second mortgage as all or part of your down payment or equity in the property. The seller is offering you a valuable incentive. Shop around for a mortgage lender that will allow you to use your seller's second mortgage as your down payment and you should be well on your way to purchasing your home.

Q: I'm married, about 30 years old, have good credit, and make a good income. Unfortunately, I am saddled with large monthly bills making it very difficult to save for a down payment? What do you suggest?

T. Young, Ellicott City

A: There are many programs, both private and public, to assist first-time homebuyers. Many lenders have special loan programs special rates to help you qualify for a home. In addition, the state of Maryland -- through the Community Development Administration or CDA -- also has programs to help first-time buyers. You should also consider existing assumable mortgages properties and also possibly seller take-back financing. Ask an agent about these options.

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