Over the past 12-18 months, the US real estate market has been gaining momentum. It is creating some great home buying opportunities in both the resale and new home markets. If you find yourself resisting the temptation to jump into the fray due to possible financing issues, it might help for you to understand there are plenty of creative ways to secure financing without having to go through traditional mortgage lenders.
8 Creative Financing Ideas
2. Partial Seller Financing – If a traditional lender is willing to approve you for a loan amount that falls well-short of the purchase price, you might be able to convince the seller to take back paper for the difference.
3. Assumable Loans – When a seller has a sense of urgency, they are usually motivated to help interested buyers find solutions. If the seller has an assumable loan with decent loan terms, they might be willing to let you take over their loan. If they don’t need immediate cash out or the home has no equity, you might be able to use this option with little to no down payment required. Note: There might be some fees you would have to pay to the lender for the transfer.
4. Rent to Own – If you really like the property, but need more time to raise the down payment, a rent to own agreement could provide the perfect bridge. The seller would use your rent payments to offset their mortgage payments until such time you are better able to purchase the property or walk away from the deal. In some cases, the seller might be willing to apply a portion of your rent towards the purchase price.
5. Short Sale Purchasing – When sellers reach the point of desperation, perhaps due to relocation issues, they sometimes resort to marketing the property well below market rates and what they still owe on the property. The equity you would be effectively buying might be enough to satisfy the down payment requirements from your lender.
6. Co-Buying – If you and your credit are in good standing, you might be able to locate an investor who would be interested in buying the home with you through a partnership agreement. In some cases, they might be willing to strike a deal where they provide the down payment and help you qualify for the loan in exchange for you making all the monthly payments. The equity in the property would then be split based on predetermined percentages.
7. Retirement Funds – If you own a 401K or IRA account, you might have the ability to borrow funds against your retirement savings. You can check with your plan administrator to see if your plan allows such loans. One of the great advantages of using this option is the interest portion of your payments will actually go back into your plan along with the principal payments.
8. Loan From Family and Friends – This is not always a great option, but in a pinch, friends and/or relatives might be willing to step up and give you a boost.
With the proper motivation, you can always find a way to get done what you really want to get done. When it comes to securing the financing for purchasing a home, it should now be clear there is “more than one way to skin a cat.”