Buying a home can be expensive, but creative financing can make it more affordable in today’s market.
1. 2-1 Buydowns: With a 2-1 buydown, the seller or builder pays part of the mortgage interest for the first two years of your loan. In the first year, your rate is 2% lower than normal and in the second year, it’s 1% lower. By year three, you pay the full rate. This reduces your initial payments and makes the home more affordable in the early years.
2. Debt-Service Coverage Ratio (DSCR) Loans: These loans are great for real estate investors. Lenders look at the income a property can generate, not just your personal income. If the rent or income from the property covers the mortgage payment, you’re more likely to qualify. This option helps if your personal income is hard to document or doesn’t meet traditional lending standards.
3. Adjustable-Rate Mortgages (ARMs): These loans have lower interest rates at first, which can make your payments smaller for the first few years. However, the rate can go up later, so they work best if you plan to move or refinance before the rate increases.
4. Down Payment Assistance Programs: Many states, cities and nonprofits offer grants or loans to help with your down payment. Some programs are aimed at first-time buyers or people with low incomes.
5. Interest-Only Loans: For a set time, you only pay the interest on the loan, not the principal. This keeps payments low at first but doesn’t help you build equity. These types of loans may apply to new business owners who haven’t established a long work history or those who expect their income to increase soon.
6. Community Land Trusts: These programs let you buy a house while leasing the land it sits on from a nonprofit. This lowers the cost of buying and keeps the home affordable for future buyers.
7. Co-Buying: Teaming up with a friend, family member or business partner to buy a home can make it more affordable. You share the costs and responsibilities but need to agree on how to manage the property.
Each of these options has pros and cons, so it’s important to do your research and talk to a trusted financial advisor to determine the best strategy for your situation. Creative financing can open doors to homeownership, even if traditional loans feel out of reach.
On behalf of Mountain Country Mortgage, we would like to wish everyone a wonderful holiday season and a Happy New Year! FBN
By Ashley Ragan
Ashley Ragan is the branch manager and loan officer at Mountain Country Mortgage.
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