Stop Renting With These 2 Affordable Paths To Homeownership

1. Habitat For Humanity Homes

You have probably heard of Habitat for Humanity before, but you may believe this one misconception about the organization: They build free homes. Does Habitat for Humanity build homes? Absolutely, but they are not free. Instead, Habitat homes are affordable, safe, and energy-efficient. And if you are lucky enough to purchase one, you can enjoy this study-backed benefit: Kids who grow up in Habitat homes are twice as likely to go to college.

While that benefit is tough to beat, here’s another reason to purchase a Habitat for Humanity home: They generate almost instant equity since they cost so little to build. For example, a Habitat home may cost $100,000 to build. Once it hits the market, its price may sit at $150,000. That’s $50,000 in instant equity, and even though you won’t want to sell right off the bat, it’s good to know that you’re taking the proper steps to build a solid financial future.

What does it take to buy an affordable Habitat home? Their typical homebuying process is as follows:

1. Get screened by your local Habitat office.
2. Complete the application.
3. Pass the background check.
4. Have an in-person interview with the Habitat team.
5. Perform sweat equity (help build the home, attend classes, perform administrative duties).
6. Enjoy your new home.

2. HUD Homes

The U.S. Department of Housing and Urban Development (HUD) offers another affordable path to homeownership. Here’s how:

1. The Federal Housing Administration offers FHA loans that help people get approved for a home without good credit, a high down payment, or expensive closing costs.
2. If someone cannot pay the FHA loan, the HUD pays what’s due.
3. The HUD now owns that home.
4. Instead of keeping the home, the HUD sells it as quickly as possible by putting it on the market at a low price.

You can take advantage of the HUD’s desire to sell homes quickly by purchasing something below market price. But as a bonus, HUD homes usually feature cheaper down payments and lower closing costs, which allows you to buy a house while saving in three separate ways.

As for what the HUD homebuying process entails, here it is in a nutshell:

1. Visit the HUD HomeStore to look for affordable houses.
2. Hire a HUD-approved real estate agent who will help you buy that home at auction.
3. Get the HUD home inspected. This is crucial since HUD homes are sold as-is and could need repairs.
4. Find financing for the HUD home via typical loans like Fannie Mae, Freddie Mac, or VA loans. If your credit score is low and you cannot afford the down payment, you could apply for an FHA loan that offers less stringent eligibility requirements.