Buying a Home With Alternative Financing Methods

The American Dream. Home ownership is something that many Americans dream of. Not everyone is fully capable or qualified. What can you do if the bank says that you are not perfect enough to buy on your own? I've put together a few ideas that may help you find a path to home ownership and fulfill The American Dream.

Using Owner Assisted Financing (OAF) to aid you with a down payment is a popular choice if the only problem you have is immediate cash-in-hand. What normally happens in these transactions is that the seller borrows you a set amount of money in order to qualify for the purchase of his home. A contract is made between the two of you wherein you set the terms of your repayment. Typically short term and for small amounts, OAF can help you acquire a loan and purchase the house in the conventional manner. To protect yourself in an OAF situation have your contract approved by a lawyer prior to signing.

What if you needed more than a little cash to sooth out the banks ill-feelings towards you? Maybe you need a little cash, a bit of equity, and with your less than perfect credit – proof that you can repay the loan. A Lease Option Agreement (LOA) may be just what you are looking for. Finding a home offering some type of “rent to own” label is very easy and becoming more and more popular. Typically you would put a small down payment on the home, work out lease terms, and then set a price and time line to purchase the home. The final sale still usually ends as a conventional sale, with you getting a loan from a bank and purchasing the house. The benefit in an LOA is that you usually work out a deal to where a portion of your monthly payment goes toward the sale of the home. Doing this over time increases the equity you have in the home come time to buy, giving you an even greater gap between the purchase price, the valuation, and your necessary loan amount.

Keeping yourself protected during an LOA is a little more complicated than with OAF. First, what was your motivation for doing the LOA in the first place? At the end of the term will you be able to qualify for a loan? Many Lease Option Agreements end without the buyer fulfilling the option to buy because they have not fully equipped themselves to acquire a loan. Don't forget the asset covering tools that you would utilize during a conventional sale, get the home inspected and valuated.

You pay your bills on time, but you have a lot of credit out at one time. Your credit is your friend, your credit score is not. And banks don't want to give you much assistance without a hefty price. The Contract For Deed (CFD) may be just the right financing tool for you. Similar to getting a loan from a bank except that the seller IS the bank. You provide them with whatever down payment they may require, work out a sale price and amortization schedule, and pay the seller month to month until completely paid off. Again, do not sign the contract until you let a lawyer see that your needs are being met. The small fee the lawyer charges you may save you thousands later.

With these easy financing tools at your ready, you should be able to find some way to purchase your next home. Even when the banks shy away from you, you know that they do not have the final word on your dreams. Whether you choose Owner Assisted Financing, a Lease Option Agreement, Contract For Deed, or Conventional Financing there is a way for you to buy a home. So serve yourself some warm apple pie in the new kitchen of your American Dream.

For more information, please visit How to Protect Yourself in a Lease Option Agreement