Trouble Buying a House? Explore These Nontraditional Home Options

Young couple renting house.
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Purchasing a home in the usual way — which often requires very good credit, coming up with as much as 20% down, and is often out of reach for individuals on one income — can be a barrier to home ownership for many. In this current housing market, which has remained remarkably bustling even through the pandemic, many people who wish to buy homes might find themselves discouraged.

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However, there are some alternative paths to home ownership that might just make it possible. Let’s review them.

Owner Financing

Owner financing is one of the most frequently available alternative paths to home ownership, said Dennis Shirshikov, a strategist at real estate investment company Awning.com.

“With owner financing the owner of the home acts as the lender for the property. The buyer pays the owner a down payment and makes monthly payments to the owner just like they would on a mortgage.”

In this situation, owners have the flexibility of accepting smaller down payments and making other concessions to sell their homes. The terms are often standardized and the interest rates are slightly higher than conventional financing.

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“Owner financing is a path to home ownership for anyone that lacks the money to make a full down payment on a property with conventional financing.”

Owner financing is also a path to home ownership for homes that do not pass the inspection criteria for banks to lend on.

Become a Live-in Landlord

One great unconventional path to home ownership is becoming a live-in landlord, said Bill Samuel, a residential real estate developer and real estate broker with Blue Ladder Development.

“Buy a small multi-family building with existing tenants in place and live in one of the vacant units. If you purchase a small multifamily property — four units or less — then you’ll be able to take advantage of the more favorable residential financing terms and you’ll benefit from an accelerated depreciation schedule,” he said.

He does warn that you need to do good due diligence on the tenants before taking this step, including a solid credit history and background check. Also make sure there are no other leases in effect or anything else that might prevent the sale from going through or bind you to a contract in a way you didn’t sign up for.

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Rent To Own

An easy alternative to home ownership is a rent-to-own deal, said Ryan Cassidy, a real estate broker at Triangle House Hunter.

“The process is quite simple. You rent a home with an option to buy before the lease expires. It’s a great option for buyers who don’t qualify for mortgages or have trouble financing. Some rent-to-buy deals make buying the home an option, while others make it mandatory. It all depends on how well you can negotiate your deal. Some sellers also allow a part of your rent to go towards building equity.”

Shared Ownership

If you don’t want to go down the traditional path of becoming a homeowner, shared ownership is a great option for you, said Carter Crowley, co-owner of CB Home Solutions. In this scenario, instead of buying an entire property, you only purchase 25-75% of its total value. A housing association, local authority or independent landlord owns the rest of the share. 

“You’ll have to pay the mortgage and rent to the landlord. Then save up money and gradually buy more shares. Once you own 75% of the house, you won’t even have to pay rent. Shared ownership is an excellent option for first-time buyers and those who can’t afford high mortgage rates.”

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Purchase Property and Build a Home

Often times, land comes at a higher price than the home itself. According to Tomas Satas, founder and CEO at Windy City HomeBuyer, you might want to consider purchasing a property with no home and building it yourself.

“With the popularity of van campers and tiny homes exploding, many people are parking these on an empty lot and living out of them while building a bigger, permanent home. Of course, this is only possible in rural areas where it is not an issue with local government.”

Buy a Foreclosed Home at Auction

One way to snag a great deal on a home is to attend auctions for real estate, said Danny Marshall, a mortgage broker with Mortgage Rate Guru.

“Real estate investors who are searching for a deal and willing to do some DIY before renting out a property frequently choose this option. A growing number of foreclosed houses are making their way to housing auctions, which can be conducted in person or online.”

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About the Author

Jordan Rosenfeld is a freelance writer and author of nine books. She holds a B.A. from Sonoma State University and an MFA from Bennington College. Her articles and essays about finances and other topics has appeared in a wide range of publications and clients, including The Atlantic, The Billfold, Good Magazine, GoBanking Rates, Daily Worth, Quartz, Medical Economics, The New York Times, Ozy, Paypal, The Washington Post and for numerous business clients. As someone who had to learn many of her lessons about money the hard way, she enjoys writing about personal finance to empower and educate people on how to make the most of what they have and live a better quality of life.

 
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