Creative Financing

Creative financing describes certain innovative methods of financing a home. Creative financing is used to help sell a home. Private mortgages are considered a type of creative financing. Private mortgages are home loans that are funded by a private lender instead of a traditional financial institution. The interest rates on private mortgages are typically much higher than traditionally financed loans. Short-sales are another type of creative financing. In a short-sale transaction, the homeowner is usually a few months past due and is facing foreclosure at any time. The prospective buyer negotiates a selling price directly with the lender. The proposed selling price is typically lower than the existing balance. If a deal is made, the home avoids foreclosure and a new loan agreement is created with the new buyer. Ultimately, creative financing minimizes the amount of money that the buyer is required to invest in purchasing a property.