Buying a home is the biggest investment you will ever make. Even if you’re not looking for a house right now, it’s always good to know your options and how to finance this purchase.

How to Finance a Home

Considering all the costs and potential expenses of homeownership, here are some ways to finance a home purchase in a clever way.   

Spreading it Out

If you have the cash to purchase your home outright, this is definitely the best way to go. However, most homebuyers need some form of financing, which means paying back a lender for their investment until you’ve paid them off. 

There are three ways to finance home purchases: with a construction loan, home equity loan, or home equity line of credit (HELOC), or through mortgaging. Home equity loans and HELOCs are interest-only loans that allow you to borrow money against the value of your home for between five and 30 years. Since they’re only taken out if needed, high-interest rates on these loans make them more expensive than mortgages over time. A HELOC has lower closing costs, but home equity loans offer homebuyers more payment flexibility. 

Mortgages, on the other hand, are the favorite type of financing. If you are located in  Missouri, then you can find KC mortgage lenders easily. While that is still a hefty sum that needs to be paid back, those are usually given with the most favorable conditions and interest.

Shop Around

Another option homebuyers can use to finance home purchases in a clever way is to shop around for different home loan options and compare rates. If you have good credit, you might qualify for an FHA home loan with 3%-5% down, or if your home has appreciated significantly since you bought it, consider refinancing into a new mortgage on your home’s increased value.

If you’re planning on staying in Kansas City for at least seven years and want the best rate possible, you’ll also want to keep an eye out for adjustable-rate mortgages (ARMs). These home financing strategies typically start with lower interest rates than fixed-rate mortgages but will change annually after homebuyers lock in their home loans. 

Location and Prices 

Home prices in Kansas City are still below average home prices compared to the rest of the country, but home prices have trended upwards at a steady pace since 2012. Home values in this region are expected to appreciate 2.4% annually through 2022, which is about 11% lower than the national home appreciation rate for this period. 

The home market in Missouri is currently volatile and homebuyers can expect to find great deals on certain home listings, while other homes may not be listed at a fair price. It’s best to hire an experienced home inspector or work with a realtor who has years of experience in this region and knows exactly how much you should offer for home purchases.

Buying Old and Renovating

Another home financing strategy homebuyers can use to finance home purchases is to buy older homes in need of renovations and improve their value through home improvement projects. You can also purchase built-in appliances or furniture for your new home when you shop at local stores like Ikea.

Start saving up; with enough money set aside, homebuyers can buy older homes that will need renovations. If the home is in good structural condition, buying an old property and then renovating it into a home you’ll enjoy living in is definitely one of the most cost-effective ways to finance home purchases. 

Find an Investor

If homebuyers don’t have a large down payment, they’re better off looking for home financing with smaller home loans. If homebuyers can’t qualify for a home loan, they should consider buying homes that need renovations and finding an investor to purchase the home and fix it up in exchange for the right to live there while the home is being fixed up.

Another way homebuyers can finance home purchases in a clever way is by finding investors interested in purchasing houses. An investor might make you an offer to buy your house and then fix it before reselling it which can help you save money on repairs and get back into homeownership faster than if you did all the renovations yourself. 

There are a few home financing strategies homebuyers can use to finance home purchases in a clever way. One of the most cost-effective ways is buying an old property and then renovating it into a home you’ll enjoy living in.

If homebuyers don’t have enough money set aside, they’re better off looking for home financing with smaller home loans or finding investors interested in purchasing houses.