Interest rates above 7% aren’t the only reason it’s unpleasant to shop for a mortgage these days. Based on the Mortgage Bankers Association’s Mortgage Credit Availability Index, mortgage loans are harder to obtain than they’ve been at any point since the housing market crash of 2008–2012. Would-be borrowers are buried under piles of paperwork deeper than they would have faced in decades past. And sky-high real estate prices mean that even buyers who have significant savings and strong credit scores might not be able to borrow enough to get the homes they want.

Homebuyers wading through 2024’s mortgage market might wonder whether there are any other options. Bottom Line Personal asked Greg McBride, chief financial analyst for, about the pros and cons of four home finance alternatives to the conventional mortgage…

Option #1: Take out a VA mortgage if you served in the military and were honorably discharged or you’re currently serving in the military. Surviving spouses of veterans also may be eligible.

Pros: VA mortgages do not require a down payment—that’s useful for would-be homebuyers who lack significant savings as well as for those who don’t want to liquidate other investments or who want to buy a property before they sell their current home. Refinancing a VA mortgage tends to be quicker and less expensive than refinancing a conventional mortgage, a plus for those who hope to refinance when interest rates fall. There are no mortgage insurance requirements for VA loans, and they often have slightly lower interest rates than conventional loans—as of the end of April, the average rate on a 30-year fixed-rate VA mortgage was 6.62%, versus 7.31% for a 30-year fixed-rate conventional mortgage, though rates vary from lender to lender.

There is no set cap on the size of a VA loan, and there are no required minimum credit scores or debt-to-income ratios, though lenders inevitably have their own standards for these.

Cons: Borrowers who take advantage of VA mortgages’ no-down-payment-required policy end up borrowing more money at today’s high interest rates than they would have if they made down payments. VA mortgages have onetime “funding fees” ranging from 1.25% to 3.3% of the loan amount. Borrowers must provide proof of service to obtain a VA “Certificate of Eligibility” from the Department of Veterans Affairs, which can take weeks, or they should work with a VA-approved lender. VA loans are intended for primary residences, though it is possible to use them to buy second homes as long as ­certain requirements are met.

Option #2: Use a reverse mortgage to finance a home purchase. Reverse mortgages typically are taken out on properties purchased many years earlier, and they are meant to allow the borrower to remain in his/her home. But one type of reverse mortgage, known as a “Home Equity Conversion Mortgage (HECM) for Purchase,” can be used to buy a home. As with other reverse mortgages, the borrower must be 62 or older to qualify.

Pros: The primary advantage of an HECM is that the buyer is not required to make monthly payments on the loan. That’s useful for retirees who want to buy properties but don’t want mortgage payments to eat up their monthly budgets.

Cons: Using an HECM for purchase requires a far larger down payment than a conventional mortgage loan—generally at least 40% of the home’s purchase price. Fees tend to be higher than with other mortgages, too—there’s an origination fee that might equal 2% of the property’s value, though this fee varies based on loan size and is capped at $6,000.

Option #3: Borrow against your financial accounts. This can be a viable way to finance the purchase of a home for someone who has a “private ­banking” or “private wealth management” relationship with a financial institution. These arrangements are offered by many large banks and investment companies to high-net-worth customers. “High-net-worth” doesn’t necessarily mean ultra-rich—financial institutions often set private banking account minimums in the neighborhood of $1 million. Customers who have these arrangements tend to receive banking services that are more personalized and flexible than are available to other customers.

Pros: This route can be much faster and easier than the conventional mortgage application process. Loans—including mortgage loans—might be available without the usual income verification or credit score requirements. This is a particularly attractive option for people who have wealth but not the solid credit histories or verifiable income required by conventional mortgage lenders. These loans often do not have any closing costs.

Cons: Private banking relationships typically have annual fees—often 1% of assets under management. The interest rates charged on these loans vary greatly but tend to be slightly higher than rates on a conventional mortgage. If the value of the borrower’s portfolio with the financial institution declines, he/she might be required to add assets to the account to prevent the loan from being called.

Option #4: Assume the seller’s mortgage. It’s sometimes possible for a homebuyer to take over the seller’s existing mortgage.

Pros: If the seller took out that mortgage before interest rates shot up in 2022, it might be a far better deal than anything a homebuyer could hope to find these days, possibly saving them tens or even hundreds of thousands of dollars over the life of the loan.

Cons: Only a small percentage of mortgage loans are eligible to be assumed—this is likely to be an option only if the seller has a VA, FHA or USDA mortgage. What’s more, lenders often make it very difficult to assume mortgages even when the loans should be assumable—it’s not in the institutions’ financial interests for these low-rate loans to continue, so they have been known to drag their feet or bury buyers in red tape. A hefty down payment might be needed even if a mortgage can be assumed—if the purchase price of the home exceeds the amount remaining on the assumed mortgage, the difference generally must be paid in cash. What to do: Have your real estate agent ask the seller’s agent if the seller happens to have a VA, FHA or USDA mortgage. Helpful: A homebuyer does not have to be a veteran to assume a VA mortgage. 

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