While mortgages are a popular way to buy a house, you will only get one if you are eligible. The qualifications include a sufficient down payment, a good credit score, and meeting the loan provider’s employment and income requirements. And don’t forget, every mortgage loan charges interest that increases how much you owe over time.
Fortunately, a mortgage isn’t the only way of buying a house. Here are four little known ways of buying an incredible house without getting an expensive loan.
Survive on One Income
Some individuals love the prospect of purchasing a house in cash but don’t see it being possible. If you are a family with two incomes, one way of buying a home without a costly loan involves depending on one income for several years.
If you and your spouse are employed and making a respectable salary—and living in an affordable location—you will be able to save for a cash purchase by maintaining a simple life and living off a single income. This method allows you to save the total income of the other person. For instance, if you both earn $50,000 annually, instead of maintaining a $100,000 annual lifestyle, live modestly, save the other half of your combined salary. In five years, you will have around $250,000 in cash to buy a house.
Of course, maintaining a simple life is easier said than achieved. To make it successful, try renting out a room in your apartment or house to help cover your monthly expenses, or you can rent a room from friends or family. Other options include reducing entertainment expenses, skipping vacations, and car-sharing. Eventually, all these sacrifices will pay off.
Sell Your House and Buy Another One
Suppose you want to downsize and have sufficient equity in your existing house. In that case, another alternative is selling your house, taking the profit, and relocating to another area with a low cost of living. This is effective when you are staying in an expensive location but are considering relocating to another area where the cost of living is favorable.
For instance, you can sell your existing house and come out with a profit of $200,000. This may be precisely what you require to buy a new house in another part of the country in cash.
Use Seller Financing
If you don’t qualify for a conventional mortgage loan, you should opt for seller financing. This is useful when you have a low credit rating or a short employment record to obtain traditional financing. Even if you have sufficient earnings to obtain a mortgage, most lenders require a minimum of 24 consecutive months of employment before approving your mortgage application.
That’s why you should opt for seller financing. Seller financing is when the house seller gives you the funding to buy the house instead of the bank. You sign a promissory note declaring to repay the loan over time. So the seller will give you the finance and transfer ownership to you but will keep the deed until you finish paying off the money.
Since you will be the legal owner of the property, you can sell or refinance it. This form of funding usually has a short-term duration of 3 – 5 years, with a balloon payment due at the end of the period for the remaining balance. Seller financing provides you time to improve your credit rating, so you refinance into a conventional mortgage so that the seller receives their money.
Get an Investor
Even so, you may not even be searching for a primary home, but instead an investment property. Obtaining a mortgage for a real estate investment is challenging. Many loan providers need a higher credit rating for investment properties; you will also need a higher down payment and more cash to upgrade the property.
However, you can get an investor who will cover the cost of purchasing and improving the property. Some investors will provide half of the financing while you provide the other half. You will also have to provide some leg work needed to increase the property’s value. Once you upgrade the property and sell it for a profit, you will divide the earnings with the investor.
Although different alternatives to mortgages exist, the hard part is finding a willing seller. To use the above ways of buying a house, you have to find a seller with zero mortgage and sufficient home equity. Contact Zeb Realty Twin waters when looking to buy a house.