There are a few traditional places to start you search for the proper financing. Many people like using their savings. Using savings to finance a new home is a great way to finance a new home for a couple of reasons. Some retirement plans have clauses written into them that will not penalize you to withdraw funds to cover the purchase of a new home. The bank you do business with is another food financing source. Because your banks knows your financing history, they have more data to use in deciding whether to offer you favorable terms. So, make sure that your relationship with your bank is strong and be prepared to fill out tons of forms.
If this is going to be a joint loan, both parties must be present. Typically the bank will not process the loan without both parties present and will generally not accept a power of attorney unless it is specifically written for the specific purpose of securing a mortgage loan. The bank is going to be looking at the information to assess the probability that you will pay your loan back in full, so honesty is a must.
One metric that will be considered is your debt to income ratio. This is a comparison of the difference of how much money you make each month versus your monthly expenditures. It is better to have a low debt to income ratio. Credit score is another way to determine whether debt will be repaid on time. These combined factors will determine if a loan is possible. If the bank decides that a loan is not in their best interest, then there are still other options for financing.
Other methods of securing financing for your new home are usually going to have a high interest rate and will require higher up front costs. There are many non-traditional financing options available but buyer beware. These options include special finance companies and capital gains investment companies, but they are hard money lenders. Hard money lenders usually only finance 60-70% of the loan value of the home and the interest rates can be much higher than commercial banks. Commercial banks never write hard money loans. There will be many legal forms that you will have to review.
Make sure that you read and understand everything before you sign it. If you have any questions about your terms, it is very important tat you get them answered before you agree to anything. Using hard money loans may be the only option to secure financing for your new home. If this is something that has to be done, then refinancing down the road is always an option.
In closing, there are many different ways to acquire financing. If you have been smart with managing your money, then potential lenders will offer you favorable interest rates and terms. If you have not had the luxury of staying debt free, then make sure that you clearly understand the other alternatives to getting traditional financing.