Alternative Mortgage Types

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There are some situations in which you might want to explore specialty mortgages. For instance, if you have plenty of stock or bond assets but would prefer to keep your investments intact and growing you might choose a pledged-asset mortgage. Or home buyers with limited cash for a down payment might choose a loan insured by the Federal Housing Authority (FHA). Guarantees by the Veterans Administration also make zero-down payment loans easily available to current and former service members.

Pledging Assets Instead of Making a Cash Down Payment

First time home buyers are not the only ones concerned about tying up a huge chunk of cash in a down payment. Many affluent buyers would rather keep their money in wealth-producing investments rather than park it in a down payment. Pledged-asset mortgages are a special type of loan that allow you to borrow 100% of the home price. Instead of making a down payment you pledge your assets like stocks, mutual funds, bonds or certificates of deposits as collateral for the loan. You continue to own those assets and to reap the earnings they generate and you avoid paying PMI. The lender’s risk is still reduced even though you’re borrowing most or all of the purchase price. If you were to quit paying the loan the lender could seize not only your home but your pledged assets as well. Plans allow you to pledge assets for your own home purchase as well as for a home bought by your child, grandchild or other close relative.

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