Home ownership provides a variety of tax and economic benefits that are not available to those who rent. While real estate is often a tremendous investment, there are methods that allow potential home buyers to own their homes faster and more economically than when purchased through a conventional mortgage. Purchasing a home through these alternative methods often can save the buyer thousands of dollars in the long run.
Of all methods of buying a home, paying cash is one of the most cost effective. Paying cash, as opposed to financing, allows the buyer to avoid the interest charges that typically are included when financing. While paying cash for a home often requires years of saving, the financial benefits can make it well worth the effort. Current homeowners also may consider selling an existing home that has acquired a good deal of equity and applying the funds received at closing toward the price of a less expensive piece of real estate.
Build it Yourself
Another method that can shave thousands of dollars off the price of a home is to build the home yourself. As opposed to the methods used by builders of decades past, today's self-built homes often are constructed with the assistance of kits. These do-it-yourself home building kits come complete with blueprints and packages of building material that often is pre-cut to fit together, eliminating much of the work and cost that typically is involved in traditional construction.
Owner financing works much the same way as traditional real estate financing done through a bank. Instead of going through a separate bank or finance company to borrow the money, the payments are made directly to the owner of the home as a result of a pre-negotiated and agreed upon contract. While interest often is included in the monthly payment, much like that of a traditional mortgage, owner-financed homes can save thousands of dollars for buyers by allowing them to avoid the cost of private mortgage insurance and points that are frequently seen in traditional mortgages.
Foreclosures and Short Sales
Purchasing a home through foreclosure or short sale is another excellent method to cut costs when purchasing a home. Foreclosed homes often are sold for a great deal less than the original cost of the home because the bank wants to stop paying to maintain the property. Short sales operate much in the same way, but homes typically are sold to an outside buyer who agrees to purchase them for less than they are worth. Banks often are willing to accept short sale offers because it eliminates much of the the ongoing costs associated with the process of foreclosure.
Tax Sale Properties
Tax sale properties are one of the lesser-known but most-effective methods of purchasing a home at a greatly reduced cost. When a current home owner falls behind on paying their property taxes, the state or county in which the home is located often places a lien on the property until the past due taxes are paid. Tax sale investors may then pay the past due tax on the property and the home owner has a set amount of time to re-pay the original taxes plus interest, which varies from state to state. If, after the allotted point of time, the homeowner does not pay the amount in full, the investor obtains the deed to the property free and clear, regardless of any amount the owed to the bank or mortgage company.