Any home purchase is a substantial investment, and one that is only going to grow greater as the years pass.
Are you considering a house purchase in the near future? If so, you’ll want to be informed about the different financing options that are available to assist you in your investment.
Building An Investment
Whether you’re leaving your parents’ home, or you are about to settle down with a partner, buying realestate is an exciting but a costly experience. Luckily, there are plenty of financing options available for prospective homeowners so that they can get into their dream house with less stress about money.
The following is a guide to some of the most common house-financing options and how each one might fit into your plans.
Preparing For Your Purchase
The first step in the house purchasing process is to start preparing. Take the time to do your research and find a good home inspector, and schedule an appointment with a bank or other potential lender.
Although many financing options are available for house purchases, from standard mortgage lenders to hard money lenders, some lenders provide more flexibility than others:
- Cash: This is the most flexible option with the least complications. It can be in any form, including savings accounts, investments, or even paychecks that you have coming soon.
- Bank: A traditional loan from a bank is another popular loan option because it provides more stability compared to cash financing.
Some banks and online lenders provide “savings” options for homebuyers who have money stashed away, but don’t necessarily need to borrow immediately.
Hard Money Lenders
Hard money lenders are not your typical mortgage lenders—they will take a higher interest rate in exchange for being able to help you get the loan that you need without all the typical paperwork involved with a regular loan.
Other options for financing include the following:
- Co-borrowing: where one or more people apply jointly for a loan.
- Lines of credit: work identical to a credit card and can be utilized for emergencies as well as for a day-to-day account.
- Soft money loans: cash is not required and the terms are easier to understand than hard money loans.
Cash Upfront Financing
One of the most common house-financing options is cash upfront financing. In this process, you’ll receive an “advanced” amount in exchange for paying some or all of your down payment upfront; typically in multiple equal installments over a time period of three months or more.
It’s important to note that there is some risk involved, because you’re giving someone a significant amount of money upfront and then paying them back over time.
Ideally, you want to research potential lenders well so that you can avoid problems—such as theft or fraud—in the future.
What Type of Financing Is Best?
The simplest answer to this question is that it’s best to have some cash saved up in case there are unexpected expenses during the process of your house purchase. After all, there is nothing worse than failing to pay for a closing inspection on your dream home because you weren’t financially prepared.