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How to buy a house when you don't have the money

Mark Villanueva Mark Villanueva

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It might seem like a bold-faced lie, but buying a house without having a large sum of money on hand is actually easier than you think. Let's take a look at this mini guide on how to purchase a piece of property even though you don't have large sums of money available for immediate liquidity. We will also take into consideration at each of the pros and cons, to further help you evaluate which tip might be more suited to your needs.

1. Rent a home as a tenant and then buy it: rent to own

This alternative is ideal for people who don't have access to whole lot of cash on hand. Thanks to this particular contract it is now possible to fully maximize the rent you pay by allowing you to purchase the property without requiring a massive down payment. Renting a property under this contract for specific period of time and you can soon call your rented house as your new home.

Pros: This formula allows you to capitalize on your rent which in any other situation would be considered a loss.

Cons: The monthly fee is usually 10-15% higher than what the rent is usually worth. In addition, it involves a host of other expenses such as having a notarized legal contract to help ensure that your mortgage is going to the right place.

2. Real Estate Leasing with Option to Purchase

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Similar to the rent-to-own formula, this contract allows the tenant to maximize the rent they pay by putting it into their new home, with the main difference that they have the option to purchase it immediately. The tenant will have to pay a monthly fee to a bank or other financial company which is usually higher than the usual rent price. At the end of the contract, you will then be able to decide whether to leave the home thus leaving all rent paid to the owner or purchase it with rent paid being deducted from the full price.

Pros: This model can be a good alternative to the mortgage for buying the first home because, since it is not really a loan, it does not include mortgages. In addition, unlike a traditional mortgage, it also allows to rate 100% of the cost of the property.

Cons: Since real estate leasing generally does not last for more than 15 years, this can mean a very high monthly fee, even 30% higher than the traditional rent.

3. For people over 60: the reverse mortgage loan

Ideal for senior citizens this home mortgage model requires no income, no credit and no monthly payment. This type of home loan allows people over 60 to access the home equity they have built up in their homes, and defer payment of the loan until they die, sell, or move out. Afterward the borrowers can use the money loaned to purchase new property, which in the proper circumstances will appreciate in value.

Pros : As long as the owner is alive, he will not have to pay any rent unless he wants to redeem the home. Payment for the capital will then be left to the people inheriting the property. In cases where the heirs don’t have the money to redeem the property they can they have the option to leave the house to the bank.

Cons: One thing to keep in mind is that in any case, the capital repaid to the value of the home will also be added to the interest accrued over time.

4. The alternative to the mortgage: sale by private title agreement

This particular form of real estate transaction is a viable alternative to the traditional mortgage because it allows the buyer to purchase a home, even though he does not actually become the owner of said property until he has paid the last installment. If you are interested in this kind of contract, you can turn to a real estate agency to find out which properties in the market allow these types of transactions.

Pros: Any seller's debts or foreclosures are not transferred to the buyer.

Cons: One should keep in mind that in this type of agreement, the buyer will be responsible for the regular maintenance of the property, even if he is not yet its owner.

Whatever real estate solution you choose, always carefully check the state of the property before signing any contract in order to avoid any unpleasant surprises.

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