Alternatives To a Standard Mortgage

By Sari R. Updated on 7/19/2017

Fannie Mae or Freddie Mac loans, otherwise known as a standard mortgage, can be hard to qualify for. 

However, there are several alternative types of home financing you may qualify for. We’ve listed your alternative options here:

Assumable loan

This is an existing mortgage loan that can be “assumed” by another person, also known as transferring a mortgage. While most standard mortgages are not assumable, government loans like Federal Housing Administration (FHA) or Veterans Administration (VA) loans, are assumable with qualification of the new borrower(s).

Affordable housing loan

Somewhat of an all umbrella term used for various mortgages for first-time home buyers. Many states, counties and communities offer attractive mortgage programs to new buyers. Ask your real estate agent or mortgage loan officer about the programs to find out if you can qualify.

Blanket mortgage

Typically a mortgage that is secured by more than one piece of property. A lender may require you to use another piece of property owned by you or another member of your family as collateral for the new home you purchase. Similar to a blended-rate mortgage, which is a refinancing plan that will combine the interest rate on an existing mortgage with the current interest rate for an additional loan amount.

Carryback financing

This alternative to a standard mortgage occurs when a seller agrees to finance either the first or a second mortgage on a home. Carryback financing can be especially helpful if you only qualify for 90 percent of the value of a home. You can ask the seller if he will carry back or hold a 10 percent mortgage, in which they assume the role of a bank.

Installment sale or land contract

A private agreement between a buyer and seller in which the title is not transferred until all payments have been made. More popular in slow housing markets or homes for sale by the seller; if you consider an installment sale be sure that a real estate attorney reviews all the contract details before you sign.

Package mortgage

Secured by a combination of real and personal property, it’s often used for vacation property such as a cabin, beach condo or ski chalet.

Subprime loan

Created for home buyers who have low credit scores or small or zero down payments. Because there is a high risk to the lender, they often charge you a higher interest rate and may require a stricter loan contract. 

Interest-only loans

In this loan, your monthly payments will only cover the interest on your mortgage loan. Your payment will not include any principal payments to create equity. Be wary of these, especially in a market with declining home values. You could easily lose money on the sale of your home, especially if you sell in the first two to four years of ownership.