It is happening more and more these days to potential home buyers; they find the perfect home at an amazing price but then are turned away because they were not approved for a mortgage loan. The real estate crisis has forced lenders to reevaluate their lending procedures and many guidelines are tighter than ever. It is not just first time home buyers either, even those buyers with good credit are being turned down for a mortgage.  

Don't be discouraged however, you may not have to walk away from owning your own home just because you were not qualified by a mortgage lender. Below are some alternative options that some home buyers are seeking to traditional mortgages. Of course everyone has a different situation but do some research, one of these may work out for you!

 Here are a few ideas:

  • Borrow From Life Insurance: You may have a whole life or other insurance policy that increases in value over time. If you borrow against that cash value, you don’t have to go through standard loan qualification.  Be sure to check with your insurance company about the risks involved
  • Owner/Seller Financing: If the seller is an investor, or if the seller owns the property free and clear, they may offer owner or seller financing options to help move the property. You will still be responsible for principal, interest and scheduled payments through a promissory note, but you probably won’t go through the rigorous qualification process that a bank requires. Typically owner or seller financing also saves mortgage origination fees and other fees tacked on by most lenders.
  • Borrow From An IRA: If you have a self-directed IRA, then you know that you can use the IRA to invest in a number of assets, including mortgages. Although you can’t use your own IRA to buy your personal home, a family member or other investor can use a self-directed IRA as the investment vehicle for your property. Private investors often step in to help with acquisition loans, although you can expect to pay a higher rate for the initial loan.
  • Lease/Purchase Option: Many investment owners are willing to offer a lease/purchase option or rent to own agreement. You are able to rent the property for a specific term, usually with higher payments than the market rate; and your rents go toward the purchase or down payment of the property.

As with any home purchase, do your homework if you are looking at alternative financing methods. Make sure the title to the property is clear and that you meet all the state lending requirements for your financing. A realtor or title company should be able to help you through the process. You also want to be sure that you are able to afford the monthly payment or repayment plan and that the investment in the home you want is sound.

 

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