The most common type of alternative financing is a personal property or “chattel” loan. Chattel loans are often used to buy manufactured homes (previously called mobile homes). These loans are similar to traditional mortgage loans but often have higher monthly payments and interest rates with shorter terms. If the borrower falls behind in payments, lenders can often repossess the home.

With chattel loans, the buyer usually buys the structure but rents the land it’s on. Landowners may raise the rent to an amount the borrower can’t afford, causing a default. Many times, the legal view of manufactured homes is that they are personal property, not real estate, making them ineligible for mortgage financing, even when the buyer owns the property it sits on.

This is another type of seller-financed arrangement. In this agreement, the seller offers credit directly to the buyer. Unlike some other property agreements, the property deed does not transfer to the buyer at the outset; instead, the seller retains full ownership until the final payment is completed. During this time, the buyer does not possess clear rights to the property or the accrued equity, which represents their level of home ownership.

This type of arrangement offers a unique structure in which ownership and property rights gradually transition to the buyer as they fulfill their payment obligations. Since the buyer doesn’t have proof of ownership:

• their payments don’t build equity in the property
• it may not be clear who is responsible for taxes and repairs
• the loans usually don’t have foreclosure protections
• buyers risk eviction and loss of investment if they fall behind in payments

Under a lease-purchase agreement, also known as “rent-to-own” or “lease with option to purchase,” the property seller is also the landlord, and the buyer resides in the property as a tenant. Typically, the buyer pays a fee upfront, or a down payment, in exchange for the option to buy the home within a specified period. If the buyer engages the option, part of their previous monthly payments may be applied toward the down payment.

In this scenario, either the seller or a financial institution can provide the buyer with credit for the remaining purchase amount, which the buyer repays gradually, and the property deed is transferred to the buyer at the loan’s outset.

However, if the buyer isn’t able or is unwilling to finalize the transaction, the arrangement might allow the seller to keep all or some of the buyer’s down payments.

In a seller-financed mortgage arrangement, the seller serves as the lender, extending credit directly to the buyer. This setup includes the immediate transfer of the property deed to the buyer, granting them full ownership rights akin to a traditional mortgage, and the buyer repays the loan over a specified period. This arrangement offers a distinct and flexible approach to property transactions.

A few states have laws that regulate seller-financed mortgages and federal laws apply only to sellers who finance more than three properties in a 12-month period. Buyers are generally left without a clear alternative if the seller hasn’t made sure that the home is livable, the contract terms are fair, and there aren’t any competing claims on the title.

When original owners stop paying their mortgages, foreclosed properties are repossessed by banks or lenders. Banks are highly motivated to sell these homes as fast as possible, often below market value.

A short sale is a home that sells for less than what’s still owed on the mortgage. The buyer makes an offer to the seller’s bank, not the seller. Some banks accept offers as low as 50% of the home’s appraised value.

Government-backed loans lower upfront requirements for buyers, although they may have higher mortgage payments. FHA (Federal Housing Administration) loans require low down payments and the USDA (U.S. Department of Agriculture) and VA (Veterans Affairs) may suspend the down payment completely.

First-time and low-income buyers may get help from local, state, or federal government to help with closing costs or part of the down payment.

The U.S. Department of Housing and Urban Development sponsors home-buying assistance programs.

Buying a home that needs serious cosmetic repairs can offer lower costs upfront and faster equity.