
Real estate boom hurts housing affordability: The 5 most and least affordable metro areas
With steep home prices, California metro areas are the nation’s least affordable.
Purchase-money mortgage is a money term you need to understand. Here’s what it means.
A purchase-money mortgage is a loan that the seller of a property issues to the buyer of a home as part of the property transaction. Also known as owner or seller financing, with a purchase-money mortgage the seller takes the role of the bank in offering the money to buy the home.
When the buyer of a home is unable to secure a conventional mortgage from a bank, she may choose to finance the home from the seller himself.
With a traditional real estate transaction, the buyer provides the seller with cash to obtain ownership of the property. However, when a buyer uses a purchase-money mortgage, the seller extends financing to the buyer. The buyer then repays the seller according to the agreed upon terms.
The buyer can combine this purchase-money mortgage with a bank mortgage and cash down payment. In return, the seller can ask a higher price on the house, as long as he’s willing to receive the money in monthly payments. Sellers may also decide to issue a purchase-money mortgage as an investment or to quickly sell a property.
Interest rates associated with purchase-money mortgages tend to be higher than those associated with traditional mortgage loans. This is due to the risk of lending money to a buyer who pays low down payment or has poor credit.
Is it time to become a homeowner? Compare different loan options to find the best deal.
Marta knows that she can’t secure approval for a conventional bank mortgage, so when she finds a house she likes, she decides to ask the seller for a purchase-money mortgage. The home costs $200,000. She provides the seller with a down payment of $10,000 and secures a purchase-money mortgage for the remaining $190,000. She pays the seller back in monthly installments, but has a higher interest rate than she would if she had been able to go through the bank.
With steep home prices, California metro areas are the nation’s least affordable.
A widely watched housing report comes out Thursday.
Top consumer mortgage news of the week
Mortgage fell off slightly this week, but it’s still a good idea to shop around for the best deal.
There’s a flip side to every form of financing, and VA loans are no exception.
Inflation is pushing mortgage rates higher.
The end of the refinancing boom means mortgage borrowers’ credit scores have retreated — but only slightly.
Looking for a mortgage? A mortgage broker is worth considering, especially for first-time buyers.