Buying a home for the first time is an exciting prospect. You’ve probably always wanted to own your own house and now you’re ready to turn that dream into a reality. Whether you’re worried about qualifying for a loan or just don’t want to deal with banks, there are several alternative ways to consider using to finance your home. Doing your research & due diligence is important, plus you can always check with a business like Ellis Equity to find out your options. Companies like this can help you find flexible financing for a house that works for you.
Now let’s dive into some alternative ways to finance your home that you may not know about…
A Family Member Can Help
Borrowing money from “friendlier” sources like your family has always been a popular option. If your parents are in a position to lend you money, consider taking it. They can provide a low-interest loan at very reasonable terms if they’re looking to help you out.
Some parents use a reverse mortgage and then give the proceeds to a family member so they can purchase their own home. As you can imagine, the drawback of this type of loan can come into play if you don’t have the money to repay them. If you consider taking a gift or loan from family, make sure the terms are well defined and you keep up your end of the bargain.
Seller Financing Is Possible
It’s possible that the home seller will finance the buyer. This doesn’t happen too often, but in cases where the home hasn’t sold for awhile, it’s possible. Although it’s not usually a good deal for the seller, it offers a lot of benefits to the buyer. You can probably close the deal much faster than you would with a traditional bank. The drawback is that the seller is going to want to charge a high-interest rate to make up for the high levels of risk.
Rent to Own
Another possible way to finance your new house is using a rent-to-own program. These plans are relatively straightforward. The person who wishes to buy the home agrees to pay rent for a specified period of time. After the payment is made, you have the option to purchase the home. The downside is that the rent is higher than normal market prices. And if you decide not to buy, the extra money paid is lost. However, if you go ahead with the deal, the money is applied to the final purchase price.
This deal works best for people who plan on buying within a three-year period, but don’t have enough money for the down payment. Those three years gives people time to get more money together, or to work on improving their credit score. You get a place to live and the chance to own it outright in the future. That can be very helpful depending on the person’s financial situation.
FHA Financing
FHA loans are insured by the Federal Housing Administration so that a lender can offer a better deal than usual with low down payments, low closing costs and easy credit qualifications. Buyers can have a down payment as low as 3.5% of the purchase price, even with if they don’t have stellar credit. If funds are tight or your credit score isn’t high enough for a conventional loan, FHA is a great option – especially for first-time buyers. There are however some downsides to consider like mortgage insurance and limited FHA approved properties so if you are considering this option, learn more starting with these 5 things you probably don’t know about FHA loans.
How much do you really know about Traditional Financing?
Although qualification standards have gotten stricter since the market crash, they are starting to loosen. Traditional financing requires good credit, a high enough income, and a sizable down payment, however not necessarily 20%. If you have all of those, talking to a bank about financing your home is a always a good option.
It doesn’t hurt to take a look at where you stand so if you’re unsure if a conventional loan is within your reach, go talk to a real estate financial specialist and find out. A conventional loan can even be comparable to FHA if know what you’re doing, just take a look at this price breakdown of FHA vs. Conventional on our blog.
Hopefully by now you’ve realized there are tons of home financing options available, so don’t be discouraged or throw in the towel just yet. If you have stable, long-term employment you can almost always find a way to finance a house – the key is to keep your options open and never give up!
This gues post is written by Anica Oaks, a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. She was raised in a big family, so she’s used to putting things to a vote. Also, cartwheels are her specialty. You can connect with Anica here.
