Many real estate buyers have experienced great difficulty in completing their home purchase over the last few years, due to a lender side issue other than the normal credit and job confirmation issues. Having a reliable job and a great credit score used to be all it took to have the banks throw money at you, but now there is some unexplainable hesitancy on their part. In an attempt to avoid facing any more defaults or at least minimize them, the banks have understandably back off of granting as many loans as they were.
Their Logic
By waiting unti there is more stability in the market, banks can make safe loans with lower interest rates? By temporarily limiting or not loaning to people who have slightly less credit, the banks can optimize their own performance by borrowing for little or nothing, and getting a return of over 5 percent per year from the lowest credit risks out there. To bolster confidence in our banking system the banks can borrow money for next to nothing, while collecting at least five percent per year return, and report record profits all the while, like they are financially brilliant.
The real estate market crash could not have been better engineered as the banks are collecting REO property and property, they are also planning on how to get all that housing product back onto the shelf for the 88 million new home buyers starting to hit the market. Many changes have had to be made to the laws to allow the banks to most aggressively take advantage of the real estate industry, and that takes time.
The Ultimate Banking Solution
Home owners were originally the lenders, before the era of the big banks and banking corporations. When a buyer did not have the cash to pay off a house, the seller simply held the deed and charged and collected interest until the note was paid in full. Acquiring your real estate in this way is the smartest way to buy your property today.
Even if you have to purchase a building lot and wait a few years to build on it, you are in a far better off situation financially than if you involve a bank. When you total up all the added fees and the interest payment banks will collect, and the insurance that you have to buy for them to make the loan, it really seems like you are the one risking instead of them.
The simple solution is for Americans to be patient and not purchase a home until they have at least 20% saved up, then buy land. Whether you use an owner carry note or can cash out on your land, you have more freedom to lead the construction of your home from there. Reinforcing a mentality of frugality will make your money go further than you though, and will keep you from being tied up in possessions that can limit your financial freedom.
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