Don’t Take It To The Bank: 4 Ways To Buy A House Without A Traditional Bank Loan

Lateet January 11, 2019

When it comes to buying a house, people most always assume it means getting a mortgage loan from the bank. But the bank isn’t the only option. For some people, it isn’t an option at all.

To get a mortgage loan approved, banks require property appraisals, good credit, stacks of paperwork/financial records, and weeks of your time. Not everyone has the time, credit, or other requirements needed to win the bank’s approval.

But if that’s you, you’re in luck. You don’t need bank approval.

There are other ways to get the money you need to buy a home. We’ve listed 4 of them below. If the bank’s not an option, try one of these 4 ways to buy a house without a mortgage.

1. Seller Financing

Some people have enough income to buy a house but are turned down by the bank due to bad credit or short employment history. If this is you, seller financing is a good option.

This means, instead of getting a loan from the bank, you get a loan directly from the seller. You become the legal owner of the home, and the seller becomes your lender.

Why would a seller do this? Usually, it’s to sell the house faster or at a higher price or interest rate.

The good news for you – closing costs are cheaper. Banks add far more fees to home loans than sellers do.

The loan will be short-term, usually 3-5 years, ending with a balloon payment for the remaining balance. But by that time, you’ll likely have improved your credit and be able to refinance with a traditional mortgage.

2. Private Lenders

Sellers willing to finance aren’t always easy to find. Consider borrowing from private lenders.

Private lenders are much more lenient than banks in their approval criteria and are very easy to find. Plus, it takes much less time to get approved than when dealing with the bank.

Private lenders stake the loan against the property. Like a bank, they will foreclose if you default.

3. Hard Money Loans

A second option is a hard money loan. These work about the same as private loans.

Hard money lenders may be more strict that private lenders in their approval criteria. But they’re often more willing to lend higher amounts.

4. Pay Cash

If time isn’t an issue, save up the money yourself. If you’re a double income home, live off one income for a few years. Then you’ll have saved enough money to pay for it with cash.

Or, maybe you already have the money for a new home and don’t even know it. Check how much equity you have in your current home. If you have enough equity, sell your current home and use the equity to buy a new house with cash.