New mortgage-underwriting criteria took effect on January 10 requiring a debt-to-income ratio of less than 43 percent for most qualified mortgages. Even if you don’t qualify for a mortgage under the current lending regulations, renting may not be your only option.

A mortgage is a loan used to purchase a property and is typically secured by the property itself. However, there are alternative options for financing a property purchase that may be more suitable for certain individuals or situations. These alternatives include:

  1. Rent-to-Own: This option allows the individual to rent the property for a specific period of time with the option to purchase the property at the end of the rental period. This can be beneficial for those who may not currently qualify for a traditional mortgage, as it allows them to build credit and save for a down payment while living in the property.
  2. Owner Financing:  With this choice, the seller of the property can take on the role of the lender and offer the buyer financing to buy the property. Due to the seller’s potential willingness to work with them on terms, this can be advantageous for buyers who might not be eligible for conventional financing.
  3. Lease-Option: Similar to rent-to-own, this option allows the individual to rent the property with the option to purchase it at the end of the rental period. However, with a lease option, the individual is required to pay an option fee, which is typically a percentage of the purchase price, and this fee is applied toward the purchase price if the individual decides to buy the property.
  4. Community Land Trust: A Community Land Trust is a non-profit organization that acquires and holds land for the benefit of a community. The organization then sells the homes on the land to low-income buyers, who have the opportunity to buy the homes at an affordable price but do not own the land underneath it. This can be a great option for low-income families who want to buy a home but do not have the means to do so.
  5. Shared Ownership: This option allows multiple individuals to purchase a property together and share in the ownership and responsibilities. This can be beneficial for those who may not have enough money for a traditional mortgage or for those who want to invest in a property with friends or family.

Mortgage Underwriting Standards

Alternatives such as rent-to-own and contract-for-deed transactions make homeownership possible for those who may not meet mortgage-underwriting standards.

These transactions have some variations depending on state rules and the contents of the legal agreement, but a rent-to-own or lease-purchase transaction often means the buyer rents from the owner for a set period of time, after which the buyer agrees to purchase the property.

In some cases, the tenant might pay extra money each month toward equity in the home. A lease-option agreement gives the lessee the option and not the obligation as with lease-purchase to later buy the property.