Mortgage Monday: Non-Traditional Mortgages

Non-Traditional Mortgages

What is a non-traditional mortgage and how do I get one?

There are four that come to mind:

1. Borrowing from your whole life policy. A whole life insurance policy builds a cash reserve over time that can be used to finance a home. It is possible to borrow against this cash value and when you borrow, there is no need to qualify for the loan. Of course, if you do not repay the money you borrowed it will reduce the face value of the policy.

2. Seller financing. Some sellers can and will carry the financing for purchasing their home. If they own the home free and clear, and are having trouble selling it due to a slow market, they may be willing to carry the financing for you, the buyer. Most homeowners do not want to be a lender, so this may not be a good option. A lot of the “Get Rich Buying Real Estate” plans use this strategy so that none of your own money is used to buy the home. You then rent the property and let the renter make the payments.

3. Borrowing from a self-directed IRA. This sounded almost too good to be true until I did some research and found that you cannot use your own IRA for the loan. You need to find someone who is not a relative who is willing to loan you money from their self-directed IRA. You can lend someone else money from your self-directed IRA to purchase a home who can then give you an interest in the home or repay you the money they borrowed like a mortgage.

4. Rent or lease to own. There are some rent-to-own deals out there. You just have to look for them, or be willing to make the offer to buy the home, and use the rent that you would be paying as a down payment. This is just like owner financing above, except instead of getting a down payment in one lump sum, you make the down payment over time.

Sometimes you need to get creative to get the home you want. Do some research and see what you kind of financing you can come up with to get you into that home you want to buy. Look at all aspects, the good as well as the bad, and find something that works for you.

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