Question  

HOW CAN A BUILDER/SELLER HELP REDUCE THE BUYER’S DOWN PAYMENT?

Answer 

 The builder/seller can help a buyer reduce the cash investment by taking a carry back second mortgage. Here is an example:

o        A person has $15,000 set aside to covering the cash investment. The builder/seller has offered to sell the lot and build a home for $200,000. The lender is only willing to provide a $150,000 construction loan. The lender verified that if Gus was able to satisfy his conditions, in three months his loan would close. Here is how the program was set up:

§         $200,000 Cost of acquisition

§         $150,000 Construction loan from the lender

§         $  15,000 Cash from the buyer

§         $  35,000 Carry back second mortgage from the builder/seller

After the construction is finished, lender funds a loan to pay off the construction loan and the builder/seller second. In certain cases, they buyer may even be able to get a portion of the initial investment.