Buying A Home - Should Your Family Help You With Your First Home?

Borrowing private money to buy your first home is gaining widespread acceptance

, particularly with first time home buyers. Under the ideal situation, both sides can take advantage of this partnership. Borrowing from your family or close friends can help you secure your initial down payment, first home loan, and even a second home loan. Some good incentives to consider borrowing from your family or friends include:

1) Enjoy Lower Interest and Tax Deductions - Private funds from family and friends would usually be one to two percent interest points lower than a regular lender, thus saving you thousands of dollars over the duration of the loan. If you put together the right documentation, you can even enjoy the same mortgage interest tax deductions as a regular loan.

2) Negotiable Monthly Payments - With family and friends, you reap the benefits of a negotiable payment schedule compared to a traditional lender. You have the option to set up quarterly payments or even range to have a grace period with no payments for the first few years. Plus if a situation occurs where you can't work temporarily, you can negotiate a temporary break from your payments until your situation gets better. You'll have a hard time locating a bank willing to be this flexible.

3) No Points Or Bank Fees - Banks can easily gouge you with thousands of dollars for loan application costs and other points. Your family and friends will spare you these high costs.

4) It Doesn't Matter What Your Credit Score Is - While a traditional lender won't consider you for a loan unless you have an impeccable credit score, a family member won't be as concerned about your creditworthiness if they believe you'll be responsible enough to pay back the loan.

5) Waive Private Mortgage Insurance - If you had to borrow more than 80% of the sales price from a lender, you'll be forced to obtain Private Mortgage Insurance (PMI). With private funding you won't be forced to pay this fee.

6) Minimal Documentation - Regular banks force you to fill out a lengthy application form and submit detailed documentation substantiating all your income, assets, and expenses before they'll even consider your loan application. Fortunately with your family and friends, you won't be subjected to such tedious scrutiny.

7) Net More Profit - When you use private financing, you have the flexibility to act fast on a great deal-especially with a seller who's facing a time deadline to move and will consider accepting a reduced offer.

8) The Condition Of Your Home Won't Be Important - If you're working with a traditional lender, there's a high probability you'll be forced to complete all major defects before the transaction is closed. A private funding source won't be as strict so you can take advantage of fixer uppers with great profit potential.

by: Sarah P. Shimanski

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