According to an article in Realty Times, homeownership is "plunging" as people continue to have difficulties obtaining mortgage loans.  This article also indicates that affordability is lower as it takes more income to purchase a home than in prior years.

While it is true that it is currently more difficult to qualify for traditional mortgages, it is also a fact that sellers who really need to sell their homes will do what they have to do to get the job done.  As in past times, alternative forms of financing are becoming more popular and I predict that they will continue to remain popular until traditional mortgages are once again easier to obtain.

Seller Carry Back

One form of financing which works well for some sellers and buyers is the Seller Carry-back loan.  Basically, this means that the seller loans the money to the buyer.  They agree upon financing terms and the buyer makes payments directly to the seller or to a title company or other servicing agent should the buyer and seller choose to have a third party keep track of payments, etc.  This is a somewhat simple arrangement if the seller owns the property free and clear.

However, there are times when this can be used even when the seller owes money on the property. There is the wrap-around loan, where the seller is still paying his own mortgage payments with the money received from the buyer.  This works best if the seller's current mortgage does not have a Due On Sale Clause.  The Due On Sale clause enables the lender (at their option) to call the loan due if the property is sold. 

There is also the case where the buyer gets a first mortgage from a traditional lender and then the seller carries back a second mortgage to enable the buyer to finance 100%.  This works best if the seller has some equity in the property.

Lease Option

Another popular choice is a lease-option, which is basically a lease with the buyer/tenant getting an option to purchase the home at a later date if he should so desire.  There is no obligation to purchase, but the buyer does get the first right of refusal before the seller sells to someone else.

Private Financing

There are also investors who will lend money privately as opposed to a borrower having to qualify through a bank.  There is still a qualification process (as in all of these alternatives), but it is somewhat less stringent than a traditional bank. 

Real estate agents and brokers tend to shy away from situations in which alternative financing is used because there is more liability involved.   However, as fewer people are able to qualify for traditional financing, more of the alternative methods will be utilized.  If you need to use alternative financing methods, I recommend that you research them extensively and beware of the risks involved.  It would be wise to work with an agent who understands these options and can inform you of the pros and cons of these forms of financing.  You can expect that your agent will also have you sign a disclosure form outlining the fact that alternative financing is more risky than traditional financing.