Owner financing is almost always a good deal if you can get it because you usually can put less money down. The transaction costs are lower and they don’t ask you to go through the process of being qualified like an organized financial organization would. No more ratios to deal with. Owner finance deals are usually used when the property for some reason can’t be financed any other way or when the owner has a lot of equity in the property but doesn’t need all the cash that would come as a result of a lender paying them off at closing. The seller can be the bank and get a good interest rate on their private mortgage to you. (Don’t forget to get your attorney involved!)   Private lenders are also a good source of funds. Sometimes they are called hardmoney lenders because they charge higher interest rates but they won’t qualify you to death. Paperwork is minimized and things can move swiftly. Once again use an attorney to review and approve any private deals! That’s a critical point.   Use “legal man” to protect you from people who can and do take advantage of the needy. Family members, uncles, aunts, parents, or grandparents are often willing to help with that down payment money that banks require. Family can sign a letter saying the money is a gift, not a loan. Otherwise, it gets factored into that 36-percent back ratio as a loan.   You could also go around the above by becoming joint owners, thus you rely on them to provide credit and down payment money. Buy them out later by refinancing in a year or so or pay them their share when you sell for a profit.   Here are some things not to do when preparing to take out a loan. Don’t go out and buy a new car, new furniture, or a boat, or charge up your credit cards. That is revolving debt on a pay-per-month plan and can sink you when it is applied toward your qualifying ratios. Wait until after you have closed on the property before you acquire any more liability for debt repayment.   Special note on credit cards: This can hurt you and you wouldn’t even know it. Say you have four credit cards with spending limits of $5,000 a piece in available credit. Now you’re a smart person so you have zero balances on all of them. You owe nothing but the lender says, “Hey, you could go into debt for $20,000 overnight just by taking cash advances.” They might say that $10,000 is as much potential debt as they would like to see. You would best be served by reducing your total ability to assume revolving debt overnight to a $10,000 limit. After you close, you can raise it if you have to.   The more cash you can personally put into a deal, the more favorable lenders will look upon you. You may be offered lower interest rates, higher qualifying ratios, maybe even a toaster. That brings us to PMI, or private mortgage insurance. This is an ugly product you pay for to protect the lender. Basically, what it does is cover the top 20 percent of your loan.   Let’s say you were able to put down 3 percent to purchase a property but you didn’t make your payments like you promised in your lender’s mortgage note. The bank can foreclose and take back your property, and sell it quickly for 80 percent of its true value because you have given them 3 percent down and your PMI policy will pay them the other 17 percent. If you can afford to self-insure, then put down 20 percent of the value of the house when you buy it. That way, you don’t throw away your money on insurance that is no benefit to you. You get a lower house payment and the bank still has their margin of safety with no mortgage insurance required. (Don’t confuse this with homeowner’s insurance).     Read other articles from Getting Started in Real Estate series by Dan Auito   Getting Started in Real Estate Your first step of action in the real estate game Finding good deals in real estate How to attract motivated sellers Start out on the right foot in real estate Money! Psychological Financial Thriller. Finance, A Necessary Evil Financing and mortgage broker lending practice 15- or 30-Year Mortgage Pros and Cons Adjustable rate or fixed rate