Alternatives to a Traditional Loan for Buying A Home

by Connie Yost-Schwerdt 09/08/2019

The decision to buy a house is probably the best decision you would ever make. Deciding is the easy part; coming up with the capital to finance the dream is the hard part. Getting a home of your own has its perks, but it can be a daunting process to acquire.

Usually, prospective homeowners seek mortgage loans when they need to get a house they can afford. The traditional mortgage has its terms and conditions for granting out loans. You must satisfy the terms and conditions before such loans become available. 

So, what happens if you do not qualify for a mortgage payment? Does this mean your ‘American Dream’ of owning a home would not see the light of day? There are other channels prospective homeowners can seek loans from aside the traditional mortgage. They include:

Lease-to-own

Lease-to-own is an agreement between the seller and the buyer. The seller rents the house to the buyer temporarily if the buyer can come up with enough money as a down payment. The rent installment paid, out of which a certain amount goes into an escrow account as money to use in securing the home. The contract is usually between a year after which the buyer pays for the balance of the property or packs out and leave. 

Borrow from Your Retirement Account

Borrowing from your retirement account is like borrowing from yourself, but this should only be short term. You will pay a penalty fee of 10% if you are not up to the age of 60 years for taking out money from your retirement account - and you would pay taxes on the amount borrowed. If you lose your job during the process, you must pay back the money borrowed within 60 days. 

Borrow from Your Insurance Policy

What’s the harm in borrowing from your insurance policy especially if your insurance policy allows you to take a loan against your principal? You don’t have to return the money, but you would get less than the amount you or your heir were supposed to get paid when the policy matures. You can apply for the loan through your insurer directly and bear in mind that the rates vary. 

Save Enough for A Down Payment

This method seems like the most convenient, but it requires you to exercise patience. Most lenders now do not need 20% as a down payment anymore but if you can’t come up with enough money as a down payment–save enough until you qualify for a traditional mortgage.

Get A Co-Signer

Getting a friend or a relative to co-sign with you is a great way to increase your chances of qualifying and to secure a loan, especially when they have a higher credit score than you.

Buying a home requires rigorous planning, and it is capital intensive. Weigh all your options before finally deciding. 

About the Author
Author

Connie Yost-Schwerdt

Connie Schwerdt is a native of Pennsylvania. She attended college in Southern California. She has lived throughout the United States, including Hawaii and abroad over the years. She made her home in Hilton Head in the 1990’s.

What you should know about Connie is that, she believes wholeheartedly in the unique, personal nature of real estate. She is a real estate professional and has been a licensed for over 17 years in South Carolina, and is also licensed in Georgia. As a seasoned professional she understands that when she is working with buyers and sellers during the real estate process, the difference is in the details.

She has worked for National & Regional Builders selling new homes for 12 years. She excelled at assisting buyers from all over the United States and was the top producing agent for the builder here in Hilton Head, SC and Charlotte, NC. This has won her numerous awards. Connie moved from Builder Sales into General Brokerage in 2010.

She has extensive real estate background as well as in depth knowledge of local communities, home values and price trends. In Connie’s practice of Real Estate, she is known for her great customer service, her ability to quickly interpret her client’s needs & wants and her consistent communication with all parties involved in a transaction. She focuses on the long term when it comes to buying or selling, not the short term. She is extremely knowledgeable as to exactly what is essential to successfully completing a transaction. She is never content to do just enough, but rather compelled to exceed your expectations and foster a pleasant real estate experience.