Homeownership is part of the American dream, but buying a house today isn’t what it used to be. For example, they’re more expensive than ever! Fortunately for modern homebuyers, there are many ways to become the owner of less expensive unconventional homes. When you think outside the box, home buying becomes more customizable and attainable than it’s ever been.
Consider Income Potential
Purchasing a property that can produce an income through rental can greatly increase your buying power. This is especially beneficial if you want to purchase in a very trendy neighborhood where home prices are inflated. A duplex gives both parties relatively equal living space and you may be able to charge the renter up to half of your mortgage payment to ease your financial burden.
If you’re not looking to sacrifice your own living space for income, look for a property that has a basement unit or a garage unit that can be rented out. Your income from the property will be less, but still a relief financially. If you’re looking to invest in a home that is currently outside of your budget, then an income property might be right for you.
Think Tiny
Are you familiar with the television show “Tiny House Nation”? Then you know there is a nationwide movement toward the minimalist lifestyle. Tiny houses are not just for first-time homebuyers. In fact, many tiny homebuyers are downsizing from a traditional home to free themselves from the financial strain of a large mortgage payment.
Tiny houses can be custom built on mobile platforms, be permanent structures built like a regular house or tiny condos in a city. The roughly 200- to 500-square-foot floor plan forces the owner to be innovative with space-saving ideas, and often most pieces of furniture serve double duty. If you’re looking to live a minimalistic life with a tiny mortgage, then a tiny house might be right for you.
Join a Co-op
Housing co-ops are similar to condo-style living, but the rules that govern the group of inhabitants are different. Instead of being a traditional homeowner and owning the unit you live in, you are a member of a co-op association. The association owns the building and all the units. The resident is a shareholder. Co-op members get tax deductions similar to regular homeowners. If you’re looking to be treated like a homeowner without taking out a mortgage, co-op membership might be right for you.
Go Modular
Modular homes, or houses built in a factory and then moved onto a building site, have many of the same benefits of a stick-built house but are often much cheaper (and greener). Despite being transportable, modular homes are not mobile homes; they also don’t depreciate in value like a mobile home.
Because these homes are built indoors, factors like weather do not impede the building plan. The efficiency of the build is what saves money over a stick-built house. If you’re looking for a traditional home at a cost savings, a modular home might be right for you.
Rent-to-Own
You’ve found your dream home but you’re just not quite ready to get a mortgage. Maybe you haven’t saved up enough for the down payment or you’re working on bringing up your credit score. Rent-to-own is a way to move into the house you want before you purchase it.
This method is more beneficial that renting a property that is not for sale, because a portion of your monthly payment goes towards the purchase price of the house. You’re not just losing money every month on rent, you are making an investment. If you’ve found your dream home just a bit too early, then rent-to-own might be right for you.
Try Owner Financing
Using owner financing is an option to purchase a home without going to the bank. This occurs when the owner is willing to accept payments directly for the home instead of requiring a lump sum from the bank. This works when the current owner owns the house outright and is not currently paying a mortgage or is able to carry multiple mortgages at once.
A similar approach is when the buyer assumes the mortgage from the seller. The buyer takes over making the mortgage payment for the seller. Often there is a lump-sum compensation, less than the total cost of the home that the buyer pays to the seller. This works when the seller still has a mortgage payment but may not need to purchase another house right away or can carry multiple mortgages at the same time. If you are trying to avoid the mortgage broker all together, owner financing might be right for you.
There are even more nonconventional ways to become a homeowner than the six listed here. Think outside the box and you will be able to make your American dream of becoming a homeowner come true.
Photo Credit: MarkMoz12
Be really careful about rent to own agreements. Typically these types of agreements have a lot of protection for the seller and not nearly as much for the buyer. In some cases, the title doesn’t even transfer for a certain amount of time which could be years. I just see a lot of opportunities for an unassuming party to get screwed over if they don’t have proper legal representation helping them to understand the contract.
I’m selling a house to a young family through rent with option to purchase agreement. It isn’t what I would prefer, but in my situation, it could prove to be a win-win for both of us. The house is in a small town that is literally dying so putting it on the market would likely yield few buyers. They have struggled with their credit score so would not qualify for a mortgage. They rented the place for a few years before we agreed to sell it, so they knew all its flaws and agreed to do the maintenance themselves. This was all done with an attorney. In less than 4 years from now, they will own their home free and clear, and we will be rid of a place that would easily become an albatross for us. Hopefully they will see it through to the end.
Before settling with rent-to-own, if you don’t buy the home for whatever reason you lose all of the extra money you paid. Be sure you are sure of it and have a secured income to pay it off.
I think the key is always to keep things in perspective. Know your budget for a house and do not look at any house priced higher than this. It is too easy to fall in love with the more expensive house and the next thing you know, you will be stuck with 30 years of mortgage payments you can’t afford.
This article purports to describe “unconventional” ways to own a house but ignores what was common not long ago and has become unconventional: the owner-built house:
https://lenpenzo.com/blog/id43684-grandfather-says-the-benefits-of-diy-housing.html
The fact that any self-respecting citizen would settle for tiny boxes to live in is discouraging. “… The roughly 200- to 500-square-foot floor plan forces the owner to be innovative with space-saving ideas…”
Being “forced” to live that way is appropriate for rabbit warrens, not human habitations.
Amen RD. Wife and I built our first house with savings and a small mortgage. Sold it, used to build the present home for cash. Been mortgage free for almost 30 years.
Beat me to it, RD. Of course I have always built and renovated my homes being a carpenter in another life. The tiny home trend is a scam. I have observed that dedicated developments of them still require a $700 monthly strata fee to park your rabbit hutch. I am a builder. The best bang for an unskilled homeowner is a (do your research!!!!) modular on a lot or property. Moving in a demo re-sited house can cost more than a new build. If a new homeowner owner wants to learn some basic skills, buy a fixer in need of cosmetic work requiring minor renovations. Then do it yourself while living in it. Do this a couple of times and be mortgage free after your few repeats.
I was mortgage free doing this by age 40 and still managed to raise a family on a modest salary.
6 years ago I built a 640 sq foot cottage for a senior friend who lost his home. I had the raw land. Including Hydro, one power pole, and new underground 200 amp service it cost me $40K. Total. I did everything myself, all phases, and it took about 6 months working 1/2 days as I am retired. I now rent it to young people starting out in life for $600 per month. Certainly, I could charge more but it covers all taxes and insurance costs and added $250K value to the property. It is insured for $200K replacement. $40 K investment, donated sweat equity which is fun and satisfying doing, produced a 400% return in value after 6 months work. I was paid to learn the skills over 50 years ago.
My brother did this and has been living on 5 acres of waterfront forever, valued at 2 mil+ last assessment. Practical skills at work, pun intended.
There are more ways to make your house “pay” for part of itself. Have a garage? Rent it for storage of classic cars or other items. Have a first floor master bedroom with ensuite bath? Turn two bedroom windows into single French doors (You need two exits to the outdoors for safety, and later you will enjoy the French doors when the house is paid for)
and rent the master suite to a single person whom you will never see. Rent to a person who never cooks at home and eats all meals out. Have an upstairs you don’t need? Close off doors to the main part of house and rent the rooms upstairs to another person who doesn’t cook at home. Your lease agreement (you will have one!) will state, among other things, “No guests, no pets, one car and no commercial vehicle parking.) I am so tired of people underwater with their monthly payments refusing to rent out part of the property to help pay the mortgage. “I like my privacy.” they whine. Get a grip folks, rent out part of the place and eventually own free and clear or live without tenants and lose the property.