Unusual Home Financing

You can never have too many home financing options at your fingertips, so put on your thinking cap and start reeling in financing tips.

Tap Your Retirement Fund

You may be allowed to borrow up to $50K or 50% of your 401K plan, whichever is lesser. First-time home buyers may qualify to take up to $10K from an IRA with no early withdrawal penalty. Check your plan. Some will allow you to borrow and you can find the details in your retirement paperwork or from your benefits advisor.

Find an Investor

If you’re handy and can take on a project, you can work with an investor by fixing up a property for them. You get to live in the home while you re-hab it and even stay after renovations are complete. After an agreed-upon period of time, you move out and the investor can flip the property for a profit. You might even be able to negotiate a split of profits to help finance your next home.

Convert Your ARM

Banks are proactively contacting customers with ARM’s and suggesting a re-finance of their loan to put them into a fixed rate. Banks know that they stand a chance of losing the loan or worse, foreclosing on a house if a homeowner can’t make the new mortgage payment.

Call your bank and ask for details on a re-fi for your adjustable-rate mortgage. ARM’s start out with a smaller interest rate, and then after 1, 3, 5, 7, or 10 years, the interest rate goes up. That lower interest rate to start might have helped get you into a home that you might otherwise not have afforded. You need to pay attention to your terms because the increased rate could put you into a much larger monthly mortgage payment.

Home Financing Tip: Save money! If your mortgage is an ARM, call your lender and ask about refinancing.

Check Out An Interest-Only Mortgage

An interest-only mortgage is just what it sounds like. You pay only the interest on the mortgage for a set term. This option is good for investors, but it’s also an option if you don’t plan on staying in the home long or if you would like to bank some money for future use.

Home Financing Tip: If saving money is a goal or if you’re planning on selling the home soon, talk to a lender about an interest-only loan.

Find A Co-Borrower

If your credit is lacking in any way, consider a co-borrower. If your parents have great credit, ask them to co-sign the mortgage with you. This is an idea that is gaining popularity. According to ATTOM Data, 22.8% of single-family home purchases in the second quarter of 2017 were written with co-borrowers on the loan. Of course, mom and dad have to have good credit and you have to pay the loan or else they will be responsible for the payment.

Ask Your Family

The IRS allows an individual annual gift exclusion amount for 2021 of $15K. Each parent can gift you the $15K. One set of parents can gift up to $60K to you and your partner! That’s an amount that can definitely help with your down payment or your home warming.

The Bottom Line

Buy your home on your own terms! When you stop and think about alternative sources to home financing or your down payment, you will find that options abound. Sit down with a pad of paper and write out all your income sources and assets. You may have found money hiding right within your own circle of family and friends!