It is of course more expensive since the interest rates on home loans are generally lower but if you can’t resort to home loans it is definitely an option to consider.
Provable income is a must to qualify for a mortgage loan as well as good credit. You may meet the rest of the loan requirements but if you can’t probe that you have the necessary income to afford the monthly payments, chances are you won’t be able to get approved for a mortgage loan.
Pool Of Personal Loans
With several personal loans of $5000 to $10000, you could easily raise the money needed to purchase a home. Many banks offer pre-approved personal loans for that amounts without having to meet additional requirements than those you needed to open the bank account.
With the aid of some friends and/or family you can obtain a pool of personal loans and get the money to purchase a home. This method requires that you have an excellent income though you may not be able to prove it. This is due to the fact that personal loans carry higher interest rates than home loans and thus the overall monthly payment of the combined loans will be significantly higher.
Easing Requirements And Reducing The Advantages
The main advantage of this method is that the requirements for approval are eased. You no longer will have to prove a steady income (two years in the same job) nor will you have to show an impeccable credit history in order to get approved. Most of these loans are already pre-approved by banks and lenders so they are really easy to get.
However, the interest rate you’ll have to pay will be significantly higher. The interest rate of personal loans can double the rate of secured loans like home loans (12% APR instead of 6% APR) which can turn the pool of loans more onerous. Also, the repayment program of personal loans is generally shorter than that of home loans. Thus, chances are you won’t get longer repayment programs than 10 years and therefore, the monthly installments combined will be high too.
And above all, your friends or family are risking ruining their credit if you can’t repay the loans on time. They must be ready to afford the monthly payments on their own if they want to make sure their credit score will remain untouched. Otherwise, a late payment, missed payment or default will ruin their credit history.
However, your home purchase won’t be at risk of repossession. Since the property wasn’t used as collateral the lenders can’t claim it in order to recover their money. Besides, you can always take a home loan later when you can show provable income and repay the previous loans obtaining longer repayment programs, lower rates and thus, smaller monthly payments. It’s just like refinancing an outstanding home loan.