(reprint from Fall 2009 issue of Housewarming newsletter)
The end of 100% financing…
Unfortunately, for some people, the end of 100% Bank financing means the end of owning a piece of the rock.
Oh dear! What do you do?
Try applying these creative options and meditating on the following tips from our elders, the book of Proverbs, and Aesop to help you regain faith in making your homeowner dreams a reality.
A wise person will listen and continue to learn.
Decisions made with attitudes of desperation usually lead to destruction. Quiet your mind. Mourn if you have to. But for the next few weeks or months, take a vacation from house shopping. Give yourself time to regain a true and clear perspective of your current situation and seek guidance for your next step options.
Schedule a meeting with your loan officer. Find out what options are currently available for you. Find out your options for payment terms, interest rates, closing costs, etc.. Ask them questions. What can you do to improve your pre-approval level? Wait for answers.
Shop around. Meet with other financial institutions to discuss their current available options. Consider more creative ways such as a second mortgage. A second mortgage is an additional mortgage the buyer will have to pay with a different lender (or with the Vendor or another individual).
Don’t bite off more than you can chew.
Reassess your home-buying checklist. Are there more wants than needs on your list? Reconsider buying the house on the hill. Consider a less costly home with more affordable monthly payments.
Present a rent-to-buy proposal to the Vendor of the house you desire to purchase. Rent-to-buy options vary and are new to Bermuda. The very basics of this option include renting the property under a normal rental agreement yet with an additional agreement to purchase the property at a future date at an agreed price. All or part of the rental payments made would be applied as a down payment at the end of the rental term, if you still desire to purchase the property.
Consider the ant, you lazy bum. Watch its ways and become wise.
Get to work! Start working on your credit. Create a regular payment plan for any loans or credit card balances that you currently have due. Paying off such debts decreases your debt ratio which increases your borrowing power. Check with the local collection agencies for any outstanding balances and to confirm that your name/credit is clear.
Start saving regularly for your closing costs. Start small – $20 a week, for example. Increase in comfortable increments. Before long, you will have the cash saved for your closing costs.
Union gives strength.
Consider purchasing a family property with your siblings. Sharing the financial load is a plus. Purchasing with others means lower individual payments and an increase in your house shopping price range. Caution! Make sure all involved have the same goal in mind. Speak with your lawyer about the pros and cons of buying property with others.
With wisdom a house is built (bought!).