Currently Reading

Homebuyers Unable to Find Traditional Mortgages Are Trying Out Alternative Financing

Advertisement
Financing

Homebuyers Unable to Find Traditional Mortgages Are Trying Out Alternative Financing

Some homebuyers who are unable to secure traditional mortgages are taking a risk and turning to alternative financing options that lack consumer protections


April 25, 2022
Home financing with cash
Image: Stock.adobe.com

Creditworthy buyers across the U.S. are having trouble finding traditional mortgages for lower-priced properties, causing millions of Americans to turn to risky and more costly alternative financing, The New York Times reports. Roughly seven million current home borrowers are using alternative financing to make payments directly to sellers without facing state and federal regulations, but also missing in those transactions are consumer protections available with traditional home loans. 

Popular types of alternative financing like “chattel” loans can be used to buy manufactured homes, but they carry much higher interest rates and shorter terms than traditional mortgages, resulting in higher monthly payments and greater interest paid over time.

In one common type of seller-financed agreement, called a “contract for deed” or a land contract, the seller extends credit directly to the buyer, who typically does not receive the deed to the property until the loan is paid. Because buyers lack proof of ownership, their payments may not build equity in the property, and it may not be clear who is responsible for taxes and repairs. The loans typically lack foreclosure protections, so buyers who fall behind in payments may risk eviction and loss of their investment if they miss a payment.

“They come with very high risk,” said Mike Calhoun, president of the Center for Responsible Lending. “They are almost always a horrible idea.”

Read more

Related Stories

Financing

Refinance Demand Jumps After Slight Drop in Mortgage Rates

Mortgage rates made a sharp U-turn after logging consecutive weekly gains, pushing borrowers back into the housing fray

Affordability

Monthly Payments for Homebuyers Are Up 25% to Record High

Inflated mortgage rates, home prices, and rents are making home purchases pricier than ever for those brave enough to try their luck

 

Housing Policy + Finance

Mortgage Rates Highest Since October 2019

30-year fixed mortgages reached 4.0% by the end of January 2021 as builders and buyers eye affordability in the new year

Advertisement
Advertisement

More in Category




Advertisement
Advertisement

Create an account

By creating an account, you agree to Pro Builder's terms of service and privacy policy.


Daily Feed Newsletter

Get Pro Builder in your inbox

Each day, Pro Builder's editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Save the stories you care about

Lorem ipsum dolor sit amet lorem ipsum dolor sit amet lorem ipsum dolor sit amet.

The bookmark icon allows you to save any story to your account to read it later
Tap it once to save, and tap it again to unsave

It looks like you’re using an ad-blocker!

Pro Builder is an advertisting supported site and we noticed you have ad-blocking enabled in your browser. There are two ways you can keep reading:

Disable your ad-blocker
Disable now
Subscribe to Pro Builder
Subscribe
Already a member? Sign in
Become a Member

Subscribe to Pro Builder for unlimited access

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.