5 Ways Other Than Cash You Can Use To Buy a House
The median sales price for homes in the U.S. is $403,200, as per Federal Reserve data. Since most mortgage loans require some kind of down payment—often at least 3% to 5%—that means you’d theoretically have to save between $12,000 and $20,000 just to get a lender’s approval.
Saving that much isn’t always feasible, but don’t let that automatically disqualify you from homeownership. You could still get a house without running through your entire savings account (or asking someone you know for a major cash loan).
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Here’s how.
1. Use a USDA Loan
Certain mortgage loans don’t require a down payment, so you don’t actually need to save up for your house. You should still have some kind of savings, like an emergency fund. You just don’t need to run through it to become a homeowner.
Take U.S. Department of Agriculture loans. If you qualify, you could finance 100% of a single-family home with this. In other words, you need a 0% down payment.
As for eligibility, your household income must not exceed 115% of the median in your area. You must also be a U.S. citizen, non-citizen national or qualified alien. Besides that, you must agree to use the property as your primary residence. The property itself needs to be located in a rural area.
2. Use a VA Loan
Like USDA loans, Veterans Affairs (VA) loans are government-backed. In many cases, you also don’t need to save up for a down payment.
You could be eligible for a VA loan if you’re a veteran or active-duty military personnel who’s served for at least 90 continuous days. The same goes for surviving spouses, but only in certain cases.
3. Use a Homebuyer Assistance Program
Homebuyer assistance programs exist to help cover upfront costs, like down payments or closing fees. They’re generally geared toward first-time buyers earning under a certain income threshold.
For example, North Carolina’s Home Advantage Mortgage program offers up to $15,000 in down payment assistance, but only to NC residents. You’ll also need to use the home as your primary residence and meet certain income and credit score requirements.
The good news is that there are similar assistance programs throughout the United States. Check with your state to see what’s available and what you need to do to qualify. Be aware that some of these programs work like loans, meaning you’ll need to repay the “borrowed” amount over time.
4. Get a Rent-To-Own Agreement
If you can’t afford to pay cash, you might consider a rent-to-own agreement. This is where you start out as a renter but slowly transition into homeownership.
Normally, these agreements entail signing a renal lease that includes an option allowing you to eventually buy the home. You might face a higher rent as a trade-off, or you might be responsible for maintenance and other fees. Any caveats like these should be clearly outlined in the agreement.
In any case, a portion of your rent payments will typically go toward the down payment for the house. This is kind of like a credit you can use when the time comes to actually buy.
5. Consider Seller Financing
Seller financing, or owner financing, is when the current homeowner acts as the lender. In this case, you don’t need to apply for a mortgage with a lender. Rather, you enter into an agreement with the current homeowner directly. This still lets you pay for the home over time, just without the middleman.
According to Note Investor, 87,212 of all real estate transactions last year were seller-financed. While this might not be the most common option, it’s worth considering if you want to buy, but you either don’t have the cash or don’t meet other lender requirements.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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