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Where To Get Money To Buy Your New Home
Where Does The Money Come From
Who would you approach first for a loan to purchase your home?
For many people, purchasing a new or new to them home is probably the most expensive purchase they will ever make.
A new home can cost several hundreds of thousands of dollars. It's a scary thought when it comes time to purchase a home. With a home purchase a person is committed to paying for that home for a period of several years.
Most people go immediately to their bank to look for a mortgage. For many of them, a personal government backed mortgage like what your bank can offer you, will be what they want. For others this is not an option.
A government-backed mortgage has several safe guards that limit who they can lend money to. If you have a poor credit rating or are considered 'risky' for any reason you may not qualify.
Don't let that stop you from achieving your dream of home ownership. There are other ways to finance a major property purchase without going to a government-backed mortgage.
Other Creditor Options
1. Relatives. You could always approach a relative or close friend for a personal loan. Make sure you have a lawyer-approved contract drawn up and signed by both parties. Also realize that taking a loan from a relative or close friend could cause stress between both parties, especially if something should happen and you can't afford to pay the loan back as fast as you originally planned.
2. Assume an existing mortgage. Sometimes homeowners will offer their mortgage as an incentive to buyers. If the interest rate on an existing mortgage is considerably less than the interest rate on a new mortgage it may make financial sense to assume the sellers mortgage. As the buyer you may have to come up with a sizable 'down payment' to make up the difference from the remaining mortgage and the sale price.
Again a contract is a must. The owner will of course keep the title to the house until the purchaser pays a predetermined amount of the purchase price. At some point ownership will pass to the buyer.
3. Rent to own. This is an option if you can find a seller willing to participate. In this situation a buyer will also be the renter. As the renter a certain amount of each monthly payment will go toward a down payment. When the seller has collected an amount equivalent to the down payment the renter then has an option to purchase the home.
4. Financed by the seller. If you can find a seller willing to finance your purchase this may be an excellent way to eventually own a home. For a seller this is an opportunity to collect a steady, monthly income for several years. As a buyer you will make an agreement with the seller to pay a certain amount of principle and interest every month towards ownership of the property. As a buyer you don't have to qualify for a government backed mortgage and you may be able to save some of the processing expenses. As an added bonus, you may be able to make accelerated payments without the penalties that a major lending institute may charge you.
5. Use the first time home-buyers’ loan. Different countries call it different names but most countries have a comparable program. Basically, this program allows you to withdraw money from your retirement investments without penalty, to make a home purchase. This is a great tool if you have money available but make sure you follow the rules so you don't get penalized.
Whether you choose a traditional or non-traditional method to finance your home purchase you need to do some research first. It doesn't matter how you choose to finance your home, it is still a major purchase and requires the careful planning and commitment that a government-backed mortgage demands.
Home ownership is a major step with both advantages and disadvantages. If you really want to be an owner you can. It may take some creative thinking and commitment but it is achievable.