Financing affordable housing might be difficult from many points of view. People with low or middle income might face difficulties saving enough for a house or getting a mortgage. The smartest way would be to apply for a traditional mortgage, but this would require a down payment, a good credit score, and other income requirements. Therefore, there are some other ways for house financing, which we will describe in this article.
Rent to Own
This option can be perfect if you do not qualify for a mortgage, as it will help you build a good credit score. If you choose a rent-to-own agreement, you will pay the owner a deposit. This deposit will allow you to purchase the house after the contract period (1-3 years) ends. This way, you can build credit score without spending money on rent. Moreover, if you decide to buy the property, the deposit and a percentage of your monthly payments will build up the sum you use for the payment.
People who do not have a good credit score for a traditional loan can apply for a private loan. Private lenders offer more credit score flexibility than banks. However, the interest rate will be higher if you consider this option. The lender will prepare a Mortgage agreement to secure the loan. The contract will put a lien on the property, which will be removed after you repay the loan.
People who have a seasonal activity or have freelance work might find the traditional mortgage repayment plan too burdensome. If your incomes are not stable, then a balloon mortgage would be a better option for you. It will allow you to pay only the monthly interest rate. The principal amount is paid at the end as a lump sum.
If you are lucky enough, you might find an owner to finance your purchase. In this case, you will sign a Real Estate Purchase Agreement, which will include the deal details between you and the owner. You do not have to pay a monthly mortgage payment to a bank but pay it directly to the owner. Consider that usually, the owner might keep the property title until the final payment.
Finally, if you do not prefer alternative funding or want to save for a down payment, consider creating a saving plan. Start by analyzing your incomes and expenses. Optimize your monthly costs by finding cheaper alternatives or removing unnecessary spendings. Another option can be to try to live on a single income for a period. If you live in a household of two, try to plan your costs based on a single income while saving the second for your property.