When buyers use a purchase currency mortgage, they make a deal with the seller. Because it is a private mortgage, there are not many regulations or requirements that a buyer or seller must meet. It depends on your agreement, but most buyers and sellers use some typical purchase currency mortgages.
Land Contract
The land contract is a mortgage, but from the seller. The buyer and seller agree on the amount of down payment, the interest rate and the frequency of payment. The buyer pays the seller the agreed amount on the agreed date. Once the buyer pays off the mortgage, the seller transfers the deed to the buyer, who owns the property.
Lease Option Agreement
A leasehold option agreement is a lease agreement that gives you the option to purchase a home during or at the end of the lease. Buyers and sellers work out lease details and purchase opportunities when they negotiate a deal.
Most rental option agreements use part of the monthly rent as a down payment on a home. If you do not exercise your right to purchase a home, you will forfeit the additional monthly payment for the purchase.
Lease-Purchase Agreement
A lease-to-purchase agreement is also a lease agreement but requires the purchase of the home before the lease expires. If you can't get traditional mortgage financing at this point, it can be cumbersome unless the seller is willing to provide seller financing.
Assuming The Seller’s Mortgage
If the seller's mortgage on the property cannot be repaid before the buyer takes possession, the buyer must assume the mortgage. This means that the buyer takes over the loan that the seller has stopped and pays the same amount at the same interest rate.
Since most homes sell for more than the amount of the existing mortgage, buyers have two types of mortgages: affordable mortgages and buy-to-money mortgages. These usually have different rates and terms. It is important to note that the buyer must meet the lender's conditions to take on the mortgage before it can be taken over
Hard Money Loans
Another option is hard currency loans, which are loans from private investors who focus on the property itself rather than the borrower's qualifications. The only problem with hard currency loans is that they are short term, and the interest rate is much higher. If the buyer doesn't have great credit, they may be a viable option, but will fix it over the next few years, making them eligible for traditional financing to pay off hard currency loans.