As house prices continue to climb higher, potential buyers are anxiously awaiting the housing market crash and wondering what their options are for affording their own homes. The median price of a home today hovers at around $226,800. In some large cities like San Franciso, that number can easily surpass $1 million. Compared to the median home value in 2000 of $119,600, that is quite a jump, and one that has weighed heavily on the budget of potential homeowners. On the bright side, the number of options for potential homeowners has also expanded in recent years. From rent to buy schemes to emerging digital home loan lenders, there are now ample avenues to buy your own home.
Shared Equity Model Boosts Affordability For Lower-Income Families
If you cannot afford to buy a house on your own, or your family falls in the lower income bracket, you may be able to use the shared equity home model. Popular with community land trusts, the model has been around for 50 years, with over 225 trusts located nationwide. In the shared equity model, the land trust retains ownership of the home, but the occupant puts it on the market, which allows for it to be sold at a lower price to the next buyer.
The shared ownership and lower price mean it is a great move for first-time, cash-strapped buyers. It also allows you time to build up enough equity to purchase your next home at market price, and much more comfortably. Seen as a combination of renting and full homeownership, the shared equity program is often done by non-profit or government organizations, who agree to provide a subsidy either directly to the homebuyer or to the developer. There is also a growing list of shared ownership programs being piloted across the country, including the One Roof Community Land Trust program, which targets homebuyers in Minnesota and Duluth. Another alternative in the CLT program is to purchase the home structure but lease the land from the CLT, which significantly reduces the buying price for the house.
Modern Day Homebuyers Flock To Digital Mortgage Lenders
For borrowers looking to improve their chances and reduce their borrowing costs, digital mortgages have quickly become a viable option. According to a study from the National Bureau Of Economic Research, digital mortgage solutions are not just more convenient; they are also reducing discrimination against black and Latinx homeowners - and their ensuing interest rates. In the study, black and Latinx homeowners pay approximately $765 million more in interest charges every year. This works out to around 0.079 percent higher than other mortgage applicants. When using digital platforms, they end up paying just 0.053 percent more. When deciding between online or traditional mortgage institutions, homebuyers should also consider the shorter approval times and removal of additional charges like an application fee and maintenance fee, which can both bump up the cost of buying a home.
Buy A Foreclosure Home At Auction
Another way to get on the homeownership ladder is to visit real estate auctions. This option is quite popular for real estate investors, who are looking for a bargain and accepting a bit of DIY before renting it out. With the number of homes being foreclosed rising, many of them are making their way to housing auctions, which can be done either online or in person. For first-time buyers, it can be a great way to buy a home for up to 30 percent less than the market value. In 2001, ABC News reported that foreclosed homes were sold for 28 percent less than other homes.
However, buyers should be prepared to do their research before the auction, since negotiations can go quite quickly. Also, buying a foreclosed home at auction may come with hidden costs like essential repairs before you can move in. While you can arrange a tour before the auction, it does not guarantee the house is up to code. Therefore, while buying a foreclosed home can be financially rewarding, it also comes with its fair share of risks.
These are just a handful of alternative ways you can get on the property ladder. For those with less than perfect credit scores, startups like Divvy Homes provide a solution by buying the home on behalf of the client and then renting it to them to accumulate equity. With more paths to homeownership coming on board, the path to owning your own home has never looked brighter. The only question that remains is: which one is the right fit for you?
