Few people can afford to pay the full purchase price in cash when purchasing a home and therefore must obtain financing. Financing a home can be a complicated process, simply because buying a home and/or property is often expensive, and involves the transfer of ownership from one person to another.

Before you consider purchasing and possibly financing a home, you should carefully analyze your financial situation to make sure you can afford to not only purchase the home, but also to maintain it within the context of your broader financial picture.

For many Americans, homeownership has served as a cornerstone in a lifetime of wealth building. However, it's important to remember that financing a home is a serious obligation, which involves a variety of risks.

The number and variety of financing options can seem overwhelming at first, but most fit in one of these main categories:

Cash: You can pay cash for a home, thereby avoiding the costs of borrowing money from a third-party to pay for the home over a set period of time.




Conventional financing: Conventional mortgages are labeled as such to differentiate them from government-backed loans, such as FHA or VA loans.




Federal government programs: Programs sponsored by the federal government through the Federal Housing Authority, Veterans Administration or Farmers Home Administration.




Alternative financing: Various alternative arrangements for home financing made by the buyer that can incorporate elements of conventional financing programs.

Remember that financing options are affected by local and regional real estate and banking practices and in some areas by state law.