As the U.S. housing market continues its uneven recovery, mortgage rates fell to record lows last week, with the 30-year fixed mortgage hitting 3.53 percent – the lowest Freddie Mac has seen since 1971, which was 3.56 percent, as reported by Bloomberg Businessweek.
However, Facebook founder and CEO Mark Zuckerberg was able to snag a 1.05 percent rate on his $6 million home, and, that's a prize not reserved specifically for billionaires.
According to NBCNews.com, some financial companies allow homebuyers to use creative methods to finance their dream house. But, borrowers usually need to have a large amount of collateral, such as stocks, bonds, mutual funds, or even a rich relative.
Tim Burke, the CEO of National Family Mortgage in Boston, told the news source he's set up loans totaling over $43 million between relatives.
"We have developed this product where, through inter-family loans, certain parents are finding value helping their adult children – if they are not qualifying for home loans and not meeting rigorous underwriting criteria," Burke said. "So instead of making payment to the bank, the adult children are making payment to mom and dad."
Burke explained that the International Revenue Service (IRS) has established "Applicable Federal Rates" (AFRs) that should be charged to a borrower to help them avoid "unnecessary tax implications." The IRS publishes a new set of AFRs each month, to help calculate interest on market loans between family members. Lenders are then able to write off mortgage interest deductions on their taxes.
Even with varying options available for prospective borrowers to find financing options, lenders would still be wise to invest in loan management software, as the housing market is not yet in complete recovery. This way, borrowers and lenders can rest assured that the payment plan created will suit both of their needs.