Buying A Home Home Loans

3 Home Mortgage Alternatives That Could Save You Money

As a renter, you often pay a higher price than the regular rental fee. The lender puts that difference toward the eventual purchase of the same home. Normally, if you decide later to not buy the home, you forfeit those extra payments.

Renting to own can be a good option if you don’t have the financial means to buy a house using a traditional home mortgage but would like to start toward owning a home now.

It is usually a good choice for people who also don’t have enough cash for a down payment. It’s a good way to keep your options open if you don’t know what your plans will be three to five years from now.

When going for a rent to own option to a home mortgage, make sure that the fine points of the deal are spelled out in your renter’s agreement.

An important point to note would be what portion goes to outright rent and what goes towards home equity. In some extreme cases, some people were able to negotiate that the lender uses most of the money towards owning the home.

Go with a private lender

If you have a low credit rating and are unable to qualify for a traditional home mortgage, you might want to go a different route such as through a private lender.

You can obtain hard money loans, and there are many private lenders that finance these kinds of deals. You can also approach real estate investors who want to earn a higher return on their investments for home financing deals.

While loans from private lenders or real estate investors have fewer requirements, the same isn’t true for hard money loans. But, be aware that the payback terms are often in favor of the lender. These terms could make the total loan amount more costly than taking out a traditional home mortgage.

While these kinds of loans have fewer requirements, the payback terms are often in favor of the lender. The total amount will be more expensive that taking out a traditional home mortgage. Interest rates can be much, much higher, reaching up to 20% at a time. You will also need to plunk down about 30% of the value as a down payment.

While using a private lender can be a way to buy your home now, you can change your funding source later as well. If your circumstances change later, you might be able to qualify for a home mortgage and pay off the private lender.

If you decide to go with a private lender instead of a traditional home mortgage, you want to vet the private lender properly. Make sure that everything is on the up and up. Be careful that you don’t make any deals with loan sharks and lending syndicates.

Owning your own home is a dream for most people. Depending on your circumstances, that dream may not be attainable if you try going the traditional home mortgage route. You might not have the credit score or down payment to use traditional home mortgage funding. Fortunately, there are other ways to own your own home.

Did you go through the traditional home loan route, or did you seek alternative financing methods?

About the author

Hank Coleman

Hank Coleman is the publisher or the popular personal finance blog, Money Q&A. He’s also a freelance journalist specializing in retirement planning, investing, and personal finance. You can also find him on Twitter @MoneyQandA.

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