How to Buy a Home Without a Mortgage

Originally Published on Fox Business by Brittany De Lea

Americans are optimistic about the housing market, and millions plan to make a purchase within the next 12 months.

Mortgages are the most common way people are able to afford to make a home purchase, but it is not the only way to buy a house.

For those looking for alternative financing methods there are other options. For example, pay for a property in cash.

According to the National Association of Realtors, all-cash transactions accounted for 20 percent of all transactions in December. In January, that percentage rose slightly to 21 percent.

“While cash buyers are often investors, if a potential homeowner has the money, there is nothing to stop them from buying for cash,” Tendayi Kapfidze, chief economist at LendingTree, told FOX Business. “Since many people do not have the cash on hand to afford a home, mortgages are a great product as they increase the accessibility of the housing market to a larger share of the population. In countries without advanced mortgage market, homeownership is reserved for the elite.”

In addition to investors, second-home buyers often comprise a significant share of all-cash transactions.

There are advantages to buying a house in cash – including the likelihood that a sale will close sooner and the fact that you won’t have to pay interest on a loan.

Another, less popular option, is seller financing. This is when the current homeowner agrees to put up part of the money needed to buy a property – in lieu of getting a mortgage from a lender. The buyer then makes monthly payments to the owner.

However, considering mortgage rates are so low, if you can get a mortgage – you may want to consider doing so.

“At current mortgage rates, it’s an incredible time to use leverage to buy a home with a mortgage,” Jarred Kessler, real estate expert and CEO of EasyKnock, told FOX Business. “We may see a once in a lifetime opportunity at these rates.”

It is important to note that while it is traditionally believed that a buyer needs to put 20 percent down on a home, you can get a mortgage with a much lower down payment. In fact, the median down payment in 2018 was 5.37 percent.

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