In real estate, creative financing is non-traditional or uncommon means of buying land or property.
Desperate borrowers with poor credit scores, bankruptcies, no verifiable income, or too much debt often take out hard money loans when they are unable to qualify for traditional mortgages.
Hard money becomes a last resort when borrowers cannot meet the lending standards set by banks or government sponsored enterprises such as Fannie Mae and Freddie Mac.
On closing day, the property title is transferred to the buyer and the newly created (owner-financed) mortgage is sold to a note investor for cash, simultaneously.
A subject-to transaction is a creative finance technique where a buyer is able to take title to property without obtaining a loan in the traditional manner.
In the application of creative financing, a land trust can be used to take control of a property while keeping the name of the owner private.
In order for a bank to agree to take less than the homeowner owes on his mortgage, the seller must often show significant hardships that have led them to being unable to continue making payments on this property.
This is a method to sell your house quickly, because effectively you pass over control of your property to the short sale investor immediately upon signing of the documents.