Interested in buying a home?
If you want to move into a house that someone else has lived in before, it’ll cost you about $240,000 on average. If you want something that’s brand-new, it’ll cost you about $330,000 on average.
Either way, there’s a good chance you’re not going to be able to pay for a house outright with cash. You’ll need to learn about the different ways to borrow money for a new house before making the investment.
You’re going to find that there are so many ways to get your hands on the money you’ll need to purchase a new home. It’s your job to figure out which one is the best option for you and your family based on your current financial situation.
Check out five different ways to borrow money for a new house below.
#1 Borrow Money From a Family Member or Friend
Of all the different ways to borrow money to buy a new house, this one will probably prove to be the most convenient for you. You won’t have to worry about filling out a bunch of forms and waiting around to get approved for a loan when you borrow money from a family member or friend.
That being said, you should always think long and hard before accepting a loan from someone you know. You could put a serious strain on your relationship with them if you struggle to pay the loan back. You could also destroy the relationship altogether if you default on the loan that they give you.
There are many people who will borrow money from their parents or grandparents when buying a home, though. Oftentimes, parents and grandparents are willing to provide their kids and grandkids with a portion of their inheritance ahead of time to help them pay for a home.
If you know that a family member or friend has money to spare and might be willing to take a chance on you, discuss the idea with them. They might be more than happy to help you get your hands on the money you need to buy a house.
#2 Borrow Money From a Bank
The vast majority of homeowners don’t own their homes outright. In fact, only about 30% of Americans own their homes “free and clear” at the moment.
Almost everyone else who owns a home has a mortgage on it. You can obtain a mortgage to buy a home by working with a bank to get one.
When you decide that you’re going to buy a home, you should look around to see which big banks would be willing to extend a mortgage to you. You should try to find one that will offer you a great interest rate on a mortgage.
Going through the process of obtaining a mortgage can take up a lot of time. You have to provide a bank with a lot of financial information to qualify for a mortgage.
But it’s the approach that most people take to buying a home. It gives them the money they need to buy a house and allows them to pay it back slowly over 15 or 30 years.
#3 Borrow Money From a Credit Union
In addition to borrowing money from a bank to buy a home, you also have the option of borrowing money from a credit union. They often have a similar process to banks when it comes to providing people with money to buy houses.
One of the big differences between banks and credit unions, though, is that credit unions tend to be smaller and also tend to offer better interest rates. You could save a ton of money in the long run by choosing to work with a credit union.
#4 Borrow Money From a Bridging Loan Company
If you already own a home and plan on buying a new one before selling your existing home, you might be wondering how to go about doing this. It can make the home-buying process a little more complicated than it would be otherwise.
If the plan is to use some of the money you’re going to get later on from selling your existing home to buy your new one, you may want to consider applying for a bridging loan.
Bridging loans provide you with the money you need to buy a new home without selling your old one first. They’re a great short-term loan option for those who need to get money fast to buy a new house.
#5 Borrow Money From Your Retirement Fund
Borrowing money from your retirement fund before you’re ready to retire is always a little risky.
You’re going to subject yourself to penalities when you borrow retirement money. You’re also going to be limited in how much you can borrow.
But if you don’t have any other choice and you have money saved up in your retirement account, you may want to consider using it to your benefit. You can usually borrow about half of what you have saved, up to $50,000, for the purpose of buying a new home or anything else you want to buy.
Just make sure you’re smart about borrowing money from your retirement fund and talk to your accountant about how it could affect your taxes. You don’t want to put yourself into a tough spot later for the sake of buying a home now.
Now That You Know the Different Ways to Borrow Money for a Home, Choose One
Very few people have hundreds of thousands of dollars lying around to spend on a new home. There have to take advantage of the different ways to borrow money to purchase a house.
You should consider each of the options presented here and find the one that’ll work the best for you. From borrowing money from a family member to taking out a bridging loan, there is sure to be something that’ll get you the money you need without putting you into a difficult financial predicament.
Read our blog to learn about some of the things you should think about before borrowing money.