Types of Financing

Posted on August 9, 2010

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I realized this week that getting financing from traditional lenders is not easy. Thus, this weekend I spent a considerable amount of time in front of my laptop searching for different types of financing. I came across a blog called Rev N You which contained a list of articles focused on financing. I would recommend anyone interested in reading about financing to visit Rev N You.

The most commons sources of financing were summarized in one article :

  1. Banks or Traditional lenders
  2. Sellers (Vendor Take Back Financing, VTB)
  3. Secondary lenders
  4. Equity Lenders
  5. Private Lenders

I would also like to add “Investors” to the list. Although you split profits, I would still count it as a type of financing. Julie Broad and Dave Peniuk of Rev N You made a point that it is a good idea to always ask the seller for VTB financing. Although it is usually a higher rate, it does not show up  on your credit. Therefore allowing you to gain financing from the bank for another property.

Julie Broad and Dave Peniuk of Rev N You wrote in another article that you should only consider coming up with a down payment on a property using 3 ways:

  1. Your own savings
  2. Equity in your home
  3. A partner with cash.

For my first purchase, I will probably go though traditional lending, paying for the down payment with my savings. However, even if I have enough savings for a second down payment for another home, because of my low income it will be difficult for me to get an additional loan. Of course, I currently do not have equity in a home. So in the future, I will surely be looking for investors to partner with in future purchases.

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