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If you have a unique situation where you cannot qualify for traditional financing, there are other options. While banks are the more traditional method of obtaining a mortgage, they’re not the only game in town. The type of alternative financing that you can obtain will depend on your particular situation. In this article we’ll give examples of situations where alternative financing may be advantageous as well as discuss three alternative financing options.

Why Alternative Mortgages?
There are several reasons why you may be in a situation to consider alternative mortgages. Here are a few examples.

• Self-Employed – If you have fewer than 2 full years completed tax returns, you’re unlikely to be able to obtain a mortgage from a bank even if you have outstanding credit. Banks require verification of income and if you can’t prove your income they will not loan to you.
• No Down Payment – All banks require some kind of down payment even if it is only 5%. If you are unable to come up with the down payment you will need to find another way of funding at least part of your loan.
• Bad Credit – Having bad credit makes it harder to qualify for any kind of mortgage financing, particularly bank financed. Don’t give up hope though. There are methods you can try to obtain a mortgage but you should expect to pay significantly higher interest rates.

Owner Contracts
An owner contract, sometimes called an owner carryback,  is where the seller of the property agrees to sell you the property on terms instead of for cash. Most owners will not sell their property on a 100% owner contract but you can find many deals where you can get a portion of the property in an owner contract. Owner contracts are ideal for folks who need down payment assistance. Many times you can get an 80% mortgage from the bank and a 20% owner contract and end up having to put nothing down.

An owner can only lend you the money if they have equity in the property. There are definitely fewer owner contract properties on the market so expect to spend more time shopping for these kinds of purchases.

Hard Money Lenders
If you only need a short term loan, you may want to consider a hard money lender. Interest rates are typically double market rates but it can make sense if you don’t need the loan for a long term. Hard money lenders charge high origination fees and interest rates and generally limit the amount they are willing to loan. However, they tend to be less picky about bad credit.

Peer to Peer Loans
There is a new kind of loan available – peer to peer lending. These are essentially online banks where private individuals lend to each other at interest rates that are based on credit scores. They are unsecured loans and are limited to $25,000.

If you’re unable to find bank financing, don’t give up. Talk to your Realtor about working with you to find an owner contract deal, or use a combination of methods to get you into the home of your dreams.