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Alternative Finance Options for Home Buyers

Updated on October 10, 2012

There are many financing options available for those interested in obtaining their new home that are considered alternative. For example, lease/purchase agreements, installment contracts, first mortgages from sources other than lenders, a second mortgage and equity financing. Though, they may be considered alternative, they are still great options. This article will cover the basics of each of these options so you have a better understanding of what each has to offer.

Lease/purchase agreements allow for the borrower to postpone payments for at least 12 months or as long as 18 months. The borrower does have to pay a down payment, but then they simply make monthly rental amounts to the seller. This is a great option for sellers who want to receive money while their home is vacant, but also great for buyers who are just not ready to settle down and buy.

An installment contract is an agreement between the buyer and seller that involve a down payment and monthly payments that are made directly to the seller. The seller may also use the balloon payments method by requiring the full amount of the home in a certain time period. The rules regarding this option will vary from state to state.

Mortgages from other sources include getting the money from family members, friends or investors. In this situation the person other than the potential buyer purchases the home, and then offers the buyer a payment arrangement that meets both parties need.

A second mortgage is used when the first mortgage does not cover the entire sales price of the home. This mortgage can be from the same lender as the first, or from a totally different source. These come in extremely handy for those people who can only get the home of their dreams if they can find the money to do so.

Equity financing is a great option for those who are living in a home and want to move to a second home. This allows for the buyer to get money from the equity of their old home. What is even better is that it has a six month period in which no payments are due until you can sell your home and pay back the equity loan in one payment. If for some reason you go beyond the six month period, you can apply for a longer period of time or see if you have other options available to you from the lender.

These are financing options that buyers are seldom aware of, however, they can be favorable in the right circumstances.


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