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If you’re having trouble financing a home via conventional lenders like banks and credit unions, don’t give up: Try creative financing for your new home.
Conventional lenders require stronger credit scores and higher down payment amounts and typical home financing involves a buyer finding a home and applying for a mortgage, getting approved, and closing on the house. But not everyone qualifies for a conventional home loan and that shouldn’t stop anyone who wants to enjoy home ownership.
In today’s market, with rising interest rates and changing job markets, including the growing work-from-home model, one size does not fit all so why not consider out-of-the-box financing or create your own? If you don’t qualify for their stricter lending requirements, check out our list of creative financing for your new home.
Check Your IRA
If you or your spouse/partner haven’t owned a home within the last two years, you may qualify to borrow up to $10,000 against your IRA, without paying the 10% penalty for early withdrawal before age 59 ½. You can even convert your traditional IRA into a Self-Directed IRA. These specialized IRA’s give you complete control over your investment accounts, allowing you to invest in real estate opportunities.
Of course, just because you can borrow against your IRA doesn’t mean you should. As you can imagine, many regulations are involved in these transactions. Read up on the process and check with your financial adviser before making any changes to your retirement accounts.
Though not as unusual as it once was, seller financing is an excellent example of creative financing.
In this method of unusual home financing, the home seller agrees to keep the banknote on the home. The home buyer pays the property owner the monthly payment until the note is either paid off or previously agreed terms are reached.
There are multiple legal agreements that leverage seller financing, but they all allow potential homeowners the opportunity to invest in great investment opportunities or give them some breathing room to improve their creditworthiness before taking on their own mortgage loan.
Sites like GoFundMe have gained tremendous popularity in the last few years, and they’ve gained traction in many circles, including real estate investing.
With the acceptance of crowdfunding platforms for new products and social causes, it didn’t take long to develop sites especially designed to help with property purchases.
Do your research. As with any investment funding opportunity, there are pros and cons.
The Bottom Line
Don’t be afraid of buying a house. Many people are fearful of complicated and daunting processes involved in buying property, not to mention the expense.
But owning your own home comes with many perks that far outweigh the purchase process. And it’s absolutely possible to purchase a home without a down payment so start thinking outside the box and investigate the many options out there for unusual home financing.