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Below are five different finance options for home purchases for those who do not want a traditional bank mortgage or do not qualify for a new home mortgage.

• Lease to own home purchase agreements turn a renter into a home buyer. Rental payments are counted toward the balance of the mortgage. However, if the renter fails to make payments on time or moves out, they do not own any of the equity in the property. If the renter ends up staying a very long time, they own the home.

• Lease option agreements provide the option to buy the home. Part of the lease can be kept in escrow as a down payment or the renter can choose to save up for a down payment. Once the down payment or minimum escrow is reached, the agreement changes from rental to ownership. The current renter may have to refinance the home into a mortgage and pay off the current owner or may take out a private mortgage with the property owner.

• Private mortgages are loans for the purchase of a home. Instead of going to a bank for the mortgage, the agreement is made with a private party. Private mortgages can provide flexible payment terms, shorter payment periods, lower interest rates or other forms of security than cash for a down payment. These agreements are also called purchase money mortgages.

• Alternative collateral loans are used to provide security for a loan for a home. The collateral can be a business, farm land or a stock portfolio. Alternative collateral loans provide a security to back up the home loan that does not include the home or can be done in addition to the home. The disadvantage of this option is how few real estate agents are familiar with this method.

• Gradual purchasing of property involves each payment going toward the purchase of the property. Gradual purchase agreements are commonly used with very large properties like farms and ranches. With each payment, the buyer is deeded another acre or two of the property. Payment after a few years includes the house and a large tract of land. This option allows someone to buy up part of a large property over time without the seller risking their whole homestead. This method of financing can be used to allow an heir or neighbor to slowly buy up a percentage of a large property.

Discuss these 5 different finance options for home purchases with your real estate professional to determine which is right for you and your unique situation.

See Also:

Lease Options & Lease Purchase Sales – about.com