At this point in your adventures, you’ve decided that you want a house, and you’ve put your finances in order. Now it’s time to overcome the first major hurdle to homeownership: paying for something hopelessly unaffordable. This chapter in the Adventures in First-Time Homebuying saga will be fraught with perils and temptations, but together we’ll overcome all obstacles and obtain one of the most important tools in your quest–a piece of paper with numbers on it!

How the Heck Do I Pay For A House?

That’s a good question, Billy. There are a number of ways you can cover the bill for a house, but you rarely see any methods other than these:

• Pay in cash. When you show up to an open house, bring a suitcase full of hundred-dollar bills and dump it on the floor. Then realize that’s now how it works, try to get your money back from the people who are now stealing it from in front of you, and then cut the owners a check with your offer. You’ll never even need to set foot in a bank.
• Get a mortgage loan. We’re going to assume that you’re not filthy rich and that you’re going to need a few bucks to help you purchase your home. We’ll proceed with the rest of this series on that assumption.

How the Heck Do I Get A Loan?

Even you, the person who wouldn’t trust me to borrow your Gameboy in third grade, can obtain a huge home loan, and there are many places from which you can get one:

• A bank. Ah, the source of all money. Just walk in, fill out a few papers, and walk out with gobs and gobs of cash. Okay, maybe it’s not that simple, but banks are the mortgage lenders. Your loan will ultimately come from a mortgage lender, but there are a few other ways you can get one without waltzing into First Bank of Your Town.
• A broker. Broker? I hardly know her! More than half of all loans originate through a broker–a person or company with access to various loan products from assorted mortgage lenders. They can scour their many lenders for the loan that’s best for you, but they’ll often charge you a fee (or get it from the lender) for their services. Still, you may end up getting a better loan going through a broker.
• An existing loan. Getting a loan from a loan? Preposterous, you say? Not at all! Some homeowners have mortgages on their properties that they can transfer to you at their current terms. Doing this is called assuming a mortgage and it can save you time and money if the existing mortgage is at a good rate.
• The owner. Some owners will give you the financing you need to purchase their home. Typically this will only happen if the owner is desperate to sell and will give you a better deal than a bank or if you’re in a sorry state of credit and you can’t get a loan otherwise.

Next time we’ll talk a little more about getting pre-approved for a mortgage loan and finding the lender or broker who is right for you.