One creative way to purchase a home is to have the seller hold back a 2nd mortgage. Sometimes, due to lower credit scores, lenders will only loan 80 or 90% of the homes value, but will allow up to 100% Combined Loan-to-Value (CLTV). This means that the borrower can finance the whole transaction, using a regular mortgage for the 1st and the sellers financing for the 2nd for a total of 100% of the purchase price.

Creative Financing is a general term use to describe a number of different situations. Most often creative financing simply means that the loan officer was able to look at your scenario and think "outside the box" and come up with a way to get the borrower something they wouldn't normally qualify for: lower rate, higher loan amount, better terms, etc.

If you have a lifestyle that is "outside the box" then your financing will probably be creative. If you are self employed then its more difficult to prove your income. What if you receive cash for the work you do? It could be difficult to qualify for a loan. This is why loan officers often need to use creativity when deciding on how to best present a loan to an underwriter. It is this process that is called "creative financing".

The term creative financing can refer to many situations. Some of those situations include when you have little money down, when you have collections, when you have low credit scores, if you are a recent college graduate with limited income history, or if your home is in foreclosure.

 

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