Are you looking for ways to finance a home but can’t settle on which method is best for you? There are many creative ways in which you can finance the purchase of a home, some of the ways being rent-to-own, borrowing against your 401(K), and installment contracts. You can compare companies that buy houses professionally to see what strategies they employ. Professional homebuyers make a living by getting creative with the ways they finance the purchases of properties. Whether they are financing a single-family home purchase or an apartment building, these strategies will translate to all types of real estate purchasing.
This article will help you decide which creative method you might want to employ to finance the purchase of a new home depending on your personal needs and the resources that are available to you.
Which Method Is Best for Financing Your Home?
To best decide on which financing method works best for you, you need to consider the resources you have available to you and the time frame you have in mind for purchasing the home. To best assess your personal situation, you should take stock of all your assets, income, and your overall financial health.
Renting To Own
Those with less-than-ideal credit, income, and saved cash may do best at financing their new home through a rent-to-own program. These programs are for those who are not under a time constraint and are okay with committing to a long-term rental contract. Once the lease runs out on the home, the renter will have an option to buy it. The benefits of renting to own include being able to purchase a home while having low income or credit and the opportunity to improve credit before applying for a mortgage. Another benefit of this home financing method is that you can test the property out before purchasing it.
Borrowing Against Your 401(K)
For those who are over the age of 59 ½, borrowing against a 401(K) may be a suitable option. Those below the age of 59 ½ will incur a 10% penalty fee and significant taxation for each time they draw upon their fund. Those borrowing against their 401(K) will have to pay their loans back with interest without income taxes or tax penalties. The benefits of borrowing against your 401(K) are that these loans include tax-deferred interest and competitive interest rates that are usually much lower than typical loans. Additionally, borrowing against your 401(K) does not negatively impact your credit score as much as borrowing a traditional loan would.
Installment Contacts
Finally, another creative way to finance your home can include borrowing an installment loan, which are personal or commercial loans that are paid during routinely scheduled payments. Each payment will also include a portion of the principal borrowed and interest on the loan. The advantages of these contracts are that they’re usually more flexible with lower interest rates.
Summary
There are a lot of creative ways to finance the purchase of a home and each way comes with advantages and disadvantages deciding on the best method requires assessing your own financial well-being. Renting to own provides those interested in purchasing a home financial opportunities they otherwise would not be able to seize due to bad credit or low income.
Borrowing against a 401(K) can be advantageous for those above the age of 59 ½ to avoid borrowing penalties and simultaneously finance their home purchase. Finally, installment contracts provide a loan to buyers with set recurring payments to assist in the purchase of a home. Whatever method you choose to finance your home, be sure to assess your own financial situation before embarking on your investment journey. Contact us today if you plan on moving and need to sell your house.