Creative ways to finance your home
When it comes to buying a home, financing options can be daunting. Thinking about loans, down payments and interest rates can be overwhelming, especially in a market that fluctuates as much as the housing one. However, the traditional ways for buying a home are not the only options. Here are some alternatives out there for becoming a homeowner.
Consider shared equity financing.
In a nutshell, shared equity financing allows for multiple families, banks and community organizations to invest in a property together. Having multiple investors in a property is affordable, but it also allows the community to create standards for properties in their neighborhood. This could include preventing things like gentrification or rapid price swings in communities that can price people out of the market. In a shared equity financing agreement, there are different roles. One party will act as an investor, and the other party will be the occupant. However, the investor isn’t solely responsible for paying. The occupant will also pay a portion of the mortgage and other housing expenses, which is all determined in the signed agreement. Additionally, if the occupant ever decides to sell the home, the investment partner or partners will get a portion of the profits made from the sale.
Look into adjustable-rate mortgages.
Adjustable rate mortgages, or ARM, are a double-edged sword. While choosing an ARM today might mean that your interest rate and monthly payments are lower, there is always the potential that the price can rise. ARMs initially start as fixed-interest-rate mortgages – meaning the interest rate you agree to at closing will stay the same for as long as your mortgage agreement states. But after a certain number of years, your financing partner can change your interest rate. For example, you might have a 30-year ARM, but your fixed interest-rate period is only the first five years. This means that after the first five years of payments, your mortgage can increase or decrease based on interest rates. While ARMs can initially be a great deal for homeowners, it’s important to recognize and understand the risks that can come later down the line. If you’re considering an ARM, talk with your lender about the amount of time your rate will remain the same, how much your interest rate can move in a year once the rate becomes adjustable, or what it might look like to refinance in the future to a fixed-rate mortgage.
Go through nonprofits like UHI.
Another nontraditional housing option is to look into nonprofits – like United Housing, Inc. – that help homeowners find more affordable housing options. Depending on the nonprofit you choose, they could offer several affordable options for home loans and home repairs. These nonprofits also provide you with an extra support system to help you walk through the process and really understand all the decisions that you’ll have to make.
At United Housing, we believe that everyone deserves a home. From affordable loans to educational classes, we want everyone to have the support and confidence they need to become homeowners. If you’re ready to make the big purchase, give us a call today.