Five Steps to Regaining Control of Your Finances

If you read the newspaper or watch TV, you can’t help but feel that everyone in the US is in debt up to their ears. With the economy still struggling to recover, we hear of more and more people becoming mired in more and more debt.

I have heard from many people who are just paying the monthly minimum, but keep on using the card. The result is that the debt just keeps growing and growing and every payday a larger part of their salary is being used to service their debt. These people want a path toward financial freedom, a place where they control their finances, instead of their finances controlling them.

The problem so many of these people have is that they want very badly to gain control of their finances, but they lack the motivation to keep on track, to keep taking the steps they need to take to make that dream happen.

For those people I offer in this article, five steps to financial freedom, steps by which you can seize control of your finances. These steps are based upon the model for self motivation. They serve the dual purpose of not only helping you get back on track, but also keeping you motivated to stay on track.

Step One: The first thing you need to do is to understand why you want to seize control of your finances. The more valuable a goal is, the more likely you are to achieve it. So write down all the positive reasons for why you want to regain control of your finances. What will you gain? reduced stress? the ability to buy things you need? a feeling of pride at how responsible you are? Also write down what will happen if you fail to make this change. Will you have to file bankruptcy? Will you lose your house? Will you be miserable and depressed and disappointed in yourself?

Step Two: Determine exactly what regaining control of your finances means in your situation. Clarity is motivating, so the clearer you are on exactly what you are moving toward, the more likely you are to get there. Here are some issues you need to get clarity on. How will you know when you have regained control of your finances? Does it mean reducing your debt? Does it mean living below your means so you can be paying off your debt? Write down what will be occurring in your life when you have succeeded. Every success you have will motivate you even more to achieve another success.

Step Three: Write down a clear description of how you are going to make this change happen. Make a plan. Write down all the steps you can think of that will help you make this change. Will you cut up your credit cards? Will you track your spending for a certain period of time? How long? Will you make a budget? Will you set aside a set percent of each pay check to use toward your debt? Will you need to take an additional, part time job for a while to catch up on your debt? Will you contact your creditors to try to work out a payment plan? Step Three provides two very important motivational impacts. Clarity, as we saw in Step Two, is motivating. But also, a big goal, like gaining control of your finances, is less scary when it is broken down into its component tasks. The less scary something is, the more confident you will be that you can succeed. Nothing is more motivating than confidence in your competence. That’s why it’s factor number two in the model for self motivation.

Step Four: Be in charge. Suze Orman says in The 9 Steps to Financial Freedom, “True financial freedom is not only having money, but having power over that money as well.” Make a conscious decision that you control your financial life. You are the boss! Power is motivating. Acting intentionally is motivating. Being a helpless victim of the economy is NOT motivating. Take charge and you will stay in charge.

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The Concept Of Finance In Different Contexts

The word finance has the sane connotations wherever it is used. It means liquid funds or cash reserves to be utilized for various purposes. For a very poor man, finance has only one meaning and that is to be able to generate enough to get him two meals a day. For a common man, it means to be able to pay off all his loan installments, his kids school fees, and his and his wife’s requirements depending upon their social circle.

For a small shop owner, the word finance means the funds he needs for his next purchase for the big occasions like Christmas and New Year. To an industrialist, the same word means his ability to complete the ongoing projects and to sign off new contracts with other companies. For a country, finance means reserves to be spent on the development of infrastructure, imports, healthcare, research and development agriculture and all other essential sectors. But in all situations, the essence of the word remains the same. It’s only the degree and magnitude that change.

Finance in itself is a big subject that is taught in business schools according to scientific rules. These finance schools produce youngsters trained in the principles of finance that go on to hold the reigns in big multinational companies. People having knowledge of sound principles of finance make the financial policies of the companies and they are accountable if any financial irregularities are found in the balance sheets or the accounts of any company.

Banks and other financial institutions are the backbone of any economy and they serve the financial needs of the people by making available loans and other mortgages to let them carry on with their projects like buying a car, electronics, home or any other thing. Banks even provide finances to let a person complete his higher education.

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Understanding Small Business Finance

If you are an entrepreneur, then you know that there is always a need for small business finance to keep things going. Being able to get the money that is needed for your business means that you need to make several financial and non-financial considerations.

Firstly, before you search for funding for your business, it is important to know what type of financing required. Would the business need debt financing (a loan for running your business) or equity financing (money that is taken from savings or investors)?

Small business finance through debt financing means taking loans from credit unions, banks and other traditional financial institutions. Among the loans that are available are short-term loans which must be repaid, with interest, within a specific period of time. Such loans may be termed as demand loans as the lender can call in the loan for repayment any time. Small business finance longer debt loans are normally used for financing assets like renovations or investments in equipment.

There are many businesses that make use of lines of credit as a source of small business finance. They make arrangements with lending institutions for a set amount of available credit that they can draw upon when need arises. Lines of credit allows businesses to use the cash when they need it and they only need to pay back the amount that has been used and interest is paid on the outstanding balance of the line of credit. Numerous lending institutions offer credit cards as a means of small business financing. These cards are used by establishments to finance their operating expenses. But, credit cards can be expensive because of the interest rates. The cards are ideal for use if the balance is paid in full monthly.

Small business finance through equity is normally used in a limited manner. Informal source of equity funding includes friends and family; while the formal sources include venture capitalists. Venture capitalists generally have a considerable pool of resources that allow them to finance ventures and participate in some of the more crucial decisions in the business. However, these capitalists conduct studies before making the decision to provide funding.

There is also some equity small business finance that are received from people who are called as “angel investors”. These are normally people who have deep pockets and are willing to provide funding.

Different types of small business finance helps to increase the chance of the business to become successful.

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Money for a Car: A Guide to Auto Financing

Nobody wants to be the dumb buyer in a car buying deal. You have to be smart or you end up losing more money than you ought to. It is a very common scheme among car buyers to first get money in order to buy a new car.

The term is called “auto financing” and it simply means how you pay for a vehicle. You can finance a car by taking out an auto loan to own a car, in which case, you have two options: You either use the money from the loan to buy the car, or use it for lease.

If this isn’t your first time buying a car, you might already know that the salesman or your car dealer will be checking your credit report before starting with the negotiations. But this is not the only way you can go to get that new car of yours. The seller will try to sweeten the deal and offer you special car finance situations in exchange for throwing yourself totally at his mercy. That is not a path you have to choose.

The key is preparation. Knowing what auto financing options you have before you get to the dealership will mean that you can take charge of your credit and take charge of your car loan.

Just remember, when you negotiate with the salesman for the most favorable auto loan, nothing is permanent until you have it in writing. So haggle and then haggle some more. Once negotiations seem to be over, that’s when the sales contract is prepared.

Inflated Interest Rates

To have the deal agreed upon by you and the salesman be put in writing in a binding contract is top on the list of the things you must do involving auto financing. Often involved at this part of the procedure is to determine monthly auto loan payments based on an interest rate. Now, as you well know, the interest rate varies from car buyer to car buyer. Your credit is only one of the factors and if the interest rate a car buyer qualifies for is inflated, then the dealership can make extra profit off your loan. That’s just one of the pitfalls in auto financing.

Independent Auto Financing

When you have the approved auto financing option on hand, you can then proceed with the deal as a “cash buyer” so to speak as you already have the cash in hand from the loan and you are just buying the car from the dealer with that money. Car salesmen prefer customers to be “monthly payment” buyers as this makes it easier for them to obscure the total cost of the vehicle, to the detriment of your savings. So wizen up and take that independent auto financing option available.

Set a Price Range

Having a budget is the sensible thing to do. If you set a sensible price range for yourself, then you have less reason to go beyond that range and succumb to the temptation of overspending. If you’re really firm on that budget, no amount of sales talk can sway you. One good tip is to ensure that your monthly car payments and related expenses do not exceed about 20% of your monthly net income.

Discounted Financing vs. Rebate

Here’s the dilemma to car buying: Many dealers offer an option between discounted financing or a rebate, but not both. Discounted financing means that you get zero-percent financing while rebate means that you get a certain amount of cash some time after purchase. The common error many car buyers make is that the zero-percent loan will deliver the most savings. But will it really?

Get the Cash Rebate

In most cases, it’s better to get the cash rebate and apply it against the purchase price of the vehicle. If you already have a pre-approved car loan, then that’s even better because you have positively no need of extra financing from your dealer. Just use your car loan to finance the car and let the rebate handle some of the charges.

You will have to choose how long you want your lease to be and how much you’re willing to pay upfront. The obvious choice, of course, would be to pay as little as possible, but be sure to weigh other options as well. After that, the car is yours for the period stipulated in the lease contract.

There are several other different plans those car buyers like you can adopt in order to make the most out of your money and reduce costs at the dealership. Understanding the credit process is just one way of being a smart buyer.

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Construction Finance and the Problem With Banks

High street banks are often the benchmark for clients looking to borrow money. This is true of personal mortgages, loans and no less so for funding building projects. Most would agree that they provide the cheapest rates and all builders and developers are looking for the cheapest construction finance.

The problem is that for most clients the high street are simply not an option at the moment, and from news I have had, nor will they be for the foreseeable future. I have dealt with clients who should be able to obtain bank funding, having clean credit, a good track record and years of experience in the sector. They are still being declined for various reasons, such as the loan amount is too low, the type of build is not what the bank wants, they have other loans that would need to be repaid first – the list goes on.

However, just because your current bank will not give you construction finance does not mean that there are no options available to you. It does mean though that you should not judge quotes we, or others give you, on the basis that the rate of interest or fees might be more than you are used to or were expecting.

Off high street lenders are NEVER going to offer building finance as cheap as the big banks. They are specialists filling a gap in the market, and to be frank, they know that your options are limited. Lenders such as this are mostly funded by investors who want to see a return on their money and the lender themselves need to charge a margin to stay in business. The market has set the rates that others are prepared to pay and so you have a stark choice – pay the higher rates or do not borrow the money. For those that are cash rich there is no issue but for the majority that want to leverage their capital it is the difference between building or not building.

Of course, paying more for the construction finance means less profit for you, the developer, but it does mean you are making more profit than not doing any work at all. If you cannot get a project funded at a high street rate then the rates you have in mind or might want to pay are not applicable for comparison. A bank may have given you funds at 1.5% above base in the past but that is irrelevant now. The past is not today.

The fact that building finance is available is good news but now is as crucial a time as ever to use a broker with experience and knowledge of the market. Making the wrong choice could cost you thousands in unnecessary fees and interest.

Going through the internet looking for lenders directly is possible, of course. But how long will that take you? Hours or days? How do you know they will be the best fit for your project? Will they give you all the information you need day 1?

Working with an experienced broker can make the process much easier as they will have a real understanding of how each lender works, the process they go through and what costs you can expect, before you get too far into an application.

So, construction finance is out there but for your own sanity don’t automatically compare it to what you are used to and what you think should be available.

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Best in Class Finance Functions For Police Forces

Background

Police funding has risen by £4.8 billion and 77 per cent (39 per cent in real terms) since 1997. However the days where forces have enjoyed such levels of funding are over.

Chief Constables and senior management recognize that the annual cycle of looking for efficiencies year-on-year is not sustainable, and will not address the cash shortfall in years to come.
Facing slower funding growth and real cash deficits in their budgets, the Police Service must adopt innovative strategies which generate the productivity and efficiency gains needed to deliver high quality policing to the public.

The step-change in performance required to meet this challenge will only be achieved if the police service fully embraces effective resource management and makes efficient and productive use of its technology, partnerships and people.

The finance function has an essential role to play in addressing these challenges and supporting Forces’ objectives economically and efficiently.

Challenge

Police Forces tend to nurture a divisional and departmental culture rather than a corporate one, with individual procurement activities that do not exploit economies of scale. This is in part the result of over a decade of devolving functions from the center to the.divisions.

In order to reduce costs, improve efficiency and mitigate against the threat of “top down” mandatory, centrally-driven initiatives, Police Forces need to set up a corporate back office and induce behavioral change. This change must involve compliance with a corporate culture rather than a series of silos running through the organization.

Developing a Best in Class Finance Function

Traditionally finance functions within Police Forces have focused on transactional processing with only limited support for management information and business decision support. With a renewed focus on efficiencies, there is now a pressing need for finance departments to transform in order to add greater value to the force but with minimal costs.

1) Aligning to Force Strategy

As Police Forces need finance to function, it is imperative that finance and operations are closely aligned. This collaboration can be very powerful and help deliver significant improvements to a Force, but in order to achieve this model, there are many barriers to overcome. Finance Directors must look at whether their Force is ready for this collaboration, but more importantly, they must consider whether the Force itself can survive without it.

Finance requires a clear vision that centers around its role as a balanced business partner. However to achieve this vision a huge effort is required from the bottom up to understand the significant complexity in underlying systems and processes and to devise a way forward that can work for that particular organization.

The success of any change management program is dependent on its execution. Change is difficult and costly to execute correctly, and often, Police Forces lack the relevant experience to achieve such change. Although finance directors are required to hold appropriate professional qualifications (as opposed to being former police officers as was the case a few years ago) many have progressed within the Public Sector with limited opportunities for learning from and interaction with best in class methodologies. In addition cultural issues around self-preservation can present barriers to change.

Whilst it is relatively easy to get the message of finance transformation across, securing commitment to embark on bold change can be tough. Business cases often lack the quality required to drive through change and even where they are of exceptional quality senior police officers often lack the commercial awareness to trust them.

2) Supporting Force Decisions

Many Finance Directors are keen to develop their finance functions. The challenge they face is convincing the rest of the Force that the finance function can add value – by devoting more time and effort to financial analysis and providing senior management with the tools to understand the financial implications of major strategic decisions.

Maintaining Financial Controls and Managing Risk

Sarbanes Oxley, International Financial Reporting Standards (IFRS), Basel II and Individual Capital Assessments (ICA) have all put financial controls and reporting under the spotlight in the private sector. This in turn is increasing the spotlight on financial controls in the public sector.

A ‘Best in Class’ Police Force finance function will not just have the minimum controls to meet the regulatory requirements but will evaluate how the legislation and regulations that the finance function are required to comply with, can be leveraged to provide value to the organization. Providing strategic information that will enable the force to meet its objectives is a key task for a leading finance function.

3) Value to the Force

The drive for development over the last decade or so, has moved decision making to the Divisions and has led to an increase in costs in the finance function. Through utilizing a number of initiatives in a program of transformation, a Force can leverage up to 40% of savings on the cost of finance together with improving the responsiveness of finance teams and the quality of financial information. These initiatives include:

Centralization

By centralizing the finance function, a Police Force can create centers of excellence where industry best practice can be developed and shared. This will not only re-empower the department, creating greater independence and objectivity in assessing projects and performance, but also lead to more consistent management information and a higher degree of control. A Police Force can also develop a business partner group to act as strategic liaisons to departments and divisions. The business partners would, for example, advise on how the departmental and divisional commanders can meet the budget in future months instead of merely advising that the budget has been missed for the previous month.

With the mundane number crunching being performed in a shared service center, finance professionals will find they now have time to act as business partners to divisions and departments and focus on the strategic issues.

The cultural impact on the departments and divisional commanders should not be underestimated. Commanders will be concerned that:

o Their budgets will be centralized
o Workloads would increase
o There will be limited access to finance individuals
o There will not be on site support

However, if the centralized shared service center is designed appropriately none of the above should apply. In fact from centralization under a best practice model, leaders should accrue the following benefits:

o Strategic advice provided by business partners
o Increased flexibility
o Improved management information
o Faster transactions
o Reduced number of unresolved queries
o Greater clarity on service and cost of provision
o Forum for finance to be strategically aligned to the needs of the Force

A Force that moves from a de-centralized to a centralized system should try and ensure that the finance function does not lose touch with the Chief Constable and Divisional Commanders. Forces need to have a robust business case for finance transformation combined with a governance structure that spans operational, tactical and strategic requirements. There is a risk that potential benefits of implementing such a change may not be realized if the program is not carefully managed. Investment is needed to create a successful centralized finance function. Typically the future potential benefits of greater visibility and control, consistent processes, standardized management information, economies of scale, long-term cost savings and an empowered group of proud finance professionals, should outweigh those initial costs.

To reduce the commercial, operational and capability risks, the finance functions can be completely outsourced or partially outsourced to third parties. This will provide guaranteed cost benefits and may provide the opportunity to leverage relationships with vendors that provide best practice processes.

Process Efficiencies

Typically for Police Forces the focus on development has developed a silo based culture with disparate processes. As a result significant opportunities exist for standardization and simplification of processes which provide scalability, reduce manual effort and deliver business benefit. From simply rationalizing processes, a force can typically accrue a 40% reduction in the number of processes. An example of this is the use of electronic bank statements instead of using the manual bank statement for bank reconciliation and accounts receivable processes. This would save considerable effort that is involved in analyzing the data, moving the data onto different spreadsheet and inputting the data into the financial systems.

Organizations that possess a silo operating model tend to have significant inefficiencies and duplication in their processes, for example in HR and Payroll. This is largely due to the teams involved meeting their own goals but not aligning to the corporate objectives of an organization. Police Forces have a number of independent teams that are reliant on one another for data with finance in departments, divisions and headquarters sending and receiving information from each other as well as from the rest of the Force. The silo model leads to ineffective data being received by the teams that then have to carry out additional work to obtain the information required.

Whilst the argument for development has been well made in the context of moving decision making closer to operational service delivery, the added cost in terms of resources, duplication and misaligned processes has rarely featured in the debate. In the current financial climate these costs need to be recognized.

Culture

Within transactional processes, a leading finance function will set up targets for staff members on a daily basis. This target setting is an element of the metric based culture that leading finance functions develop. If the appropriate metrics of productivity and quality are applied and when these targets are challenging but not impossible, this is proven to result in improvements to productivity and quality.

A ‘Best in Class’ finance function in Police Forces will have a service focused culture, with the primary objectives of providing a high level of satisfaction for its customers (departments, divisions, employees & suppliers). A ‘Best in Class’ finance function will measure customer satisfaction on a timely basis through a metric based approach. This will be combined with a team wide focus on process improvement, with process owners, that will not necessarily be the team leads, owning force-wide improvement to each of the finance processes.

Organizational Improvements

Organizational structures within Police Forces are typically made up of supervisors leading teams of one to four team members. Through centralizing and consolidating the finance function, an opportunity exists to increase the span of control to best practice levels of 6 to 8 team members to one team lead / supervisor. By adjusting the organizational structure and increasing the span of control, Police Forces can accrue significant cashable benefit from a reduction in the number of team leads and team leads can accrue better management experience from managing larger teams.

Technology Enabled Improvements

There are a significant number of technology improvements that a Police Force could implement to help develop a ‘Best in Class’ finance function.

These include:

A) Scanning and workflow

Through adopting a scanning and workflow solution to replace manual processes, improved visibility, transparency and efficiencies can be reaped.

B) Call logging, tracking and workflow tool

Police Forces generally have a number of individuals responding to internal and supplier queries. These queries are neither logged nor tracked. The consequence of this is dual:

o Queries consume considerable effort within a particular finance team. There is a high risk of duplicated effort from the lack of logging of queries. For example, a query could be responded to for 30 minutes by person A in the finance team. Due to this query not being logged, if the individual that raised the query called up again and spoke to a different person then just for one additional question, this could take up to 20 minutes to ensure that the background was appropriately explained.

o Queries can have numerous interfaces with the business. An unresolved query can be responded against by up to four separate teams with considerable delay in providing a clear answer for the supplier.

The implementation of a call logging, tracking and workflow tool to document, measure and close internal and supplier queries combined with the set up of a central queries team, would significantly reduce the effort involved in responding to queries within the finance departments and divisions, as well as within the actual divisions and departments, and procurement.

C) Database solution

Throughout finance departments there are a significant number of spreadsheets utilized prior to input into the financial system. There is a tendency to transfer information manually from one spreadsheet to another to meet the needs of different teams.

Replacing the spreadsheets with a database solution would rationalize the number of inputs and lead to effort savings for the front line Police Officers as well as Police Staff.

D) Customize reports

In obtaining management information from the financial systems, police staff run a series of reports, import these into excel, use lookups to match the data and implement pivots to illustrate the data as required. There is significant manual effort that is involved in carrying out this work. Through customizing reports the outputs from the financial system can be set up to provide the data in the formats required through the click of a button. This would have the benefit of reduced effort and improved motivation for team members that previously carried out these mundane tasks.

In designing, procuring and implementing new technology enabling tools, a Police Force will face a number of challenges including investment approval; IT capacity; capability; and procurement.

These challenges can be mitigated through partnering with a third party service company with whom the investment can be shared, the skills can be provided and the procurement cycle can be minimized.

Conclusion

It is clear that cultural, process and technology change is required if police forces are to deliver both sustainable efficiencies and high quality services. In an environment where for the first time forces face real cash deficits and face having to reduce police officer and support staff numbers whilst maintaining current performance levels the current finance delivery models requires new thinking.

While there a number of barriers to be overcome in achieving a best in class finance function, it won’t be long before such a decision becomes mandatory. Those who are ahead of the curve will inevitably find themselves in a stronger position.

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The New Rule For Buying a Home – Using Owner Financing

The American Dream; what does it mean to you? People have different jobs or hobbies or passions in life, but one constant remains the same among all of us, and this common thread that unites our dreams is that of Home Ownership! Unfortunately, in this current economy, achieving the dream of home ownership is becoming more difficult than any time in recent history. Too many Americans are following the unwritten rule of home ownership that tells us to ‘Find a Realtor and Get a Bank Loan’. In past economies, with thriving job markets, lower inflation, and less credit restraint, that ‘rule’ may have made sense to follow.

But our current economic system is making it difficult for the average person to achieve the American Dream of Home Ownership. In times of unstable job markets, with double digit unemployment forcing people to become self-employed to make a living, the banks are requiring a W-2 stable job history in order to issue loans. In times of a great credit crisis, the banks are requiring stricter credit scores than most people are able to achieve. Fewer and fewer honest, hard working Americans who are used to following the ‘traditional rules’ for owning a home are having the opportunity to own their own homes.

What if you could achieve the American Dream of Home Ownership without the assistance of a bank?

The purpose of this document is to allow motivated home seekers an opportunity to write a New Rule of Home Ownership that allows you to declare your freedom from the services of a Bank in order to partake in your piece of the American Dream of Home Ownership!

In order to understand the New Rule of Home Ownership, let’s take a closer look at the existing rules of purchasing a house with Traditional Bank Financing.

The first part of the Traditional Bank Financing focuses on Qualifying for a Loan. While many different loan packages exist, the most common loan written in today’s market is an FHA Loan, and therefore, we shall use their guidelines as an example. The following are guidelines for an FHA Loan:

o FHA Loans require a minimum credit score of 620 to be eligible for a loan
o FHA will require 3.5% down on the home. This down payment MUST come from your account. You are not allowed to borrow from friends, family or anyone else. You must document where the funds for the down payment came from. Specifically, the source of the down payment must be from your personal checking, savings or retirement account and CAN NOT be borrowed!

In order to work with most Realtors, you must first get pre-approved for a bank. Many Realtors won’t even show you a house unless you can prove that you are able to afford and receive financing for the property. This painful process of pre-approval from a bank can take 2-3 days and involve the following steps:

o Proof of Creditworthiness
o You must provide 2-4 years worth of tax returns!
o You must provide your last 4 pay check stubs if you are an employee or an updated Profit and Loss statement if you are self-employed, a business owner, an independent contractor or entrepreneur. However, if you cannot show a consistent pay stub as proof of income, then you may want to skip ahead to the part of this document where ‘Owner Financing’ is discussed, as you will find it increasingly difficult to qualify for a mortgage.
o Your bank may require you pay off other debit to help improve your credit score to qualify for the loan
o And the worst part… this proof of creditworthiness is done throughout the entire home buying process! Even once you qualify and pick out the home of your dreams; underwriters at the bank will have you go through the same process to make sure you still qualify.

Now that you are pre-qualified for the home of your dreams, you may finally begin the process of working with a Realtor to find your new home.

Once you’ve found your home, the Traditional Banks will want an inspection performed on the home and may require the seller to fix EVERYTHING for the bank to finance your loan. Some people just want a small discount on the house and they will do their own repairs however, many times a traditional bank will not allow you to do this! These small fixes may add to the total price of the house.

Also, expect to pay Realtor fees, bank fees, filling fees, “point buy down” fees, loan origination fees, closing costs, title fees, surveys, appraisal fees, and anything else imaginable for which to be charged. Though many of these fees can be rolled into your loan, over the long term, you may be paying an extra 10% in unnecessary Financing Fees that are loaded into your loan!

What if there was a quicker, easier, and less intrusive way to take your share of the American Dream? What if you could look at homes without having to pay a Realtor fee, pre-qualify for a loan, and go through a 3 month home buying process? After all, we ARE in a BUYER’S market in Real Estate, so why shouldn’t we be able to buy?

Consider the possibility of declaring a New Rule. Instead of working with (and paying for) a Realtor, why not work with the Seller directly? Especially if that seller is a Professional Real Estate Investor who is not only willing to sell the house in a quick and simple matter, but is also will to FINANCE the sale of the house on a short-term basis!

Earlier in this eBook, we went over the process of the Tradition Bank Financing. Now, we shall detail the 7 Easy Steps of Purchasing Your Home with Owner Financing:
* Contact the Seller of the Home without having to pre-qualify for a loan and look at the home to decide if you want to purchase.
* Settle on a price
* Agree to a down-payment and interest rate
* Once you’ve agreed to a price, down payment, and interest rate, complete a Deposit to Hold form and pay this 1% fee applicable to the sales price of the property. This fee will take the property off the market while you are closing on the home.
* Fill out credit application; provide 2 most recent paycheck stubs and bank statements as proof that you can afford the monthly payment.
* (Optional) If you chose, you can order your own home inspection to review the condition of the home
* Close in 2-5 business days

Buying a home from a Professional Real Estate Investor is quick and easy. Once you have settled on the price and monthly payments, you have minimal paperwork to complete and can close on the transaction within one week! The following is a summary of some of the benefits of Owner Financing compared with Traditional Bank Financing:
* In many cases, there is no minimum credit score required
* Instead of 10% Traditional Bank Finance Fees / Closing Costs, your Owner Finance Fee averages to 5% of the transaction.
* Unlike Traditional Bank Financing, your down payment for Owner Financing may come from almost anywhere (as long as it is a legal way to raise the funds). You can borrow the money from family, friends, others. There are also some tax incentives for you to use part of your retirement savings. Either way, with Owner Financing, you are allowed to raise your own down payment as you see fit!
* You and the Owner Finance Seller will agree on a time to “close” on the home and may close within 5 business days!
* Your Owner Finance loan is dependent on your down payment and ability to pay the monthly payment and NOT on your credit or having a W-2 Job. Therefore, Business Owners, Entrepreneurs, Independent Contractors, and the Self-Employed may qualify for Owner Financed Homes!
* You are not required to provide extensive documentation to obtain your loan

Due to the efficiency, simplicity, and cost effectiveness, you can see why buying directly from an investor with Owner Financing is the New Rule for Buying Homes. Owner Financing interest rates may be a little higher than market price when you initially purchase your home, however, this higher rate, along with a sizeable down payment, will actually help you obtain conventional financing at a lower rate down the road when you decide to refinance!

A good way to look at Owner Financing is that is a solution to buying a home with short-term financing. Once you have paid your Owner Financed note on time for say 12-24 months, it’s easier to refinance your existing note with a traditional bank loan at a lower interest. It’s much quicker, easier, and less intrusive to refinance a home into traditional financing then it is to purchase a home with traditional financing!

The following example will detail the process and the costs of owner financing:

o John chooses to purchase a beautiful home for $150,000 with a traditional bank loan. John’s credit score is 590 and the bank will not loan him any money until his credit score is at least 620. John understands the importance of owning a home and wants to buy something now.
o John finds a home that is being offered for $150,000 with Owner Financing. John has $15,000 to put down and wants to close in 5 business days. John’s new loan is at an 8.5% rate for 30 years and the sellers would like John to refinance his loan in 24-36 months. John’s monthly payment is $1,350 and it includes Principle, Interest, Insurance, and HOA fees. John is happy because he can afford $1,350 per month and is able to take his part of the American Dream!
o As John pays on time for, say, 24 months, John has an excellent payment history with his current lender. John will also need to be working on his credit in those 24 months to raise his score to the current minimum of 620.
o When John approaches a traditional bank John will be able to demonstrate the following:
o John’s $15,000 down payment shows that he has ‘skin in the game’ and is not just going to bail on his house payments
o John CAN afford and has been paying $1,350 a month at a 8.5% rate for his loan
o John’s credit score is now above the minimum required 620
o If John can afford $1,350 a month at 8.5% interest, John can easily afford a $1,100 a month payment at 6.5%!

It is much easier to refinance a loan rather than trying to get a loan for the original financing! Since you are already in the house, there is no inspection required, no lengthily closing procedures and there is no longer all that extra red tape that is associated with buying a home with traditional financing!

As you can see, purchasing with Owner Financing can be easily done and quickly closed for those who cannot use a traditional bank loan but deserve to own a home now.

Summary

In today’s market, due to tough economic times, there are many people selling their properties. Yet, despite the fact that this is a ‘buyer’s market’, it is tougher to buy a home with Traditional Bank Financing than ever before. Following the old, unwritten rules will lead you to a long and unhappy life in an apartment complex. Motivated home seekers looking for their piece of the American Dream are unable to achieve this great promise by traditional and conventional means due to stringent lending requirements initiated by the very same financial institutions that gladly took over 1 billion of our tax dollars to bail them out! Banks tightening up on their lending practices is causing a shortage of homebuyers in the market. This is one of the biggest reasons that real estate values continue to free fall because there are not enough people who can qualify for available homes while following the unwritten rules.

Inspired home seekers, looking to break away from the old rules and ready to write his or her own New Rules to Home Ownership will be able to take advantage of this buyer’s market, and with Owner Financing, you will see more and more people purchasing homes. If you are in the market to buy a home however, you cannot qualify for a traditional loan, I strongly recommend you contact a company that specializes in Owner Finance Homes.

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