Hurdles aren't insurmountable; Ways to finance a house today

Does the housing market have you thinking you may never be able to afford a house? Young first-time buyers are having to face up to several problems these days:

* High down payments.

* Super-high interest rates.

* Enormous monthly payments.

Maybe your salary isn't all that great yet; and to top it off, you have little or no money left over for a down payment. Still, you are determined to buy a house.

Well, now there's some good news for you. There are several ways to get a house you can afford.

If money for a down payment is your problem, you can search for a rent-with-an-option- to-buy house, work out a second mortgage with the seller, take advantage of some of the new-type mortgage instruments around, or offer different kinds of trades.

Let's say you have a little money for a down payment -- maybe no more than a few thousand dollars at best.

You want to buy something that will build equity for you. You know you can't afford a $60,000 or $65,000 house (and that's low in many markets today), but you don't want a mobile home either. All those magazine stories about young people buying $80,000 and $90,000 condominiums leave you with your lower lip sagging.

You can search the real-estate ads for older-type homes which the seller will finance.

Often, the current owner will carry the loan at a cheaper rate and you can eliminate the brokerage fees as well. Maybe the seller is in a high-income bracket and wants to defer capital gains (profits that would be heavily taxed) or a retired seller might need the monthly payments as income.

If you have very little cash to put down, you might agree on a lump-sum payment -- says, $500 -- once a year as a second mortgage. These kinds of loans are quick to arrange. But pay a real-estate expert to go over the arrangements with a fine-tooth comb.

The owner may be so generous because he's hiding termites inside the house or forgot to tell you that a highway is coming through the backyard.

Duplexes offer several good options. You can buy a duplex, live in half, and then rent the other half to help meet the mortgage payments. Just make sure you could make the total payment if you had to.

It's also a good idea to buy half a duplex because federal savings and loan associations will write a conventional loan on a duplex with only 10 percent down. A duplex is often $10,000 to $15,000 cheaper than a detached house, but it will appreciate in value at the same rate, according to Kristelle L. Petersen , author of "The Single Person's Home-Buying Handbook" (New York: Elsevier-Dutton Publishing Company).

Ms. Petersen explains in her book how two single people can buy a duplex together.

"Jill and Anita, two nurses working on their graduate degrees, were both paying astronomical rents for their Santa Barbara apartments," she writes. "They figured buying a duplex would substantially decrease their monthly housing expenses.

"Buying a duplex would give them enough flexibility so that if one decided to move, she could either rent out her half or sell it to the person remaining.

"One year later, Jill took a job in the Midwest and Anita married, so Jill sold out her interest to Anita and her husband who refinanced the property and put the deed in their names as husband and wife."

The book gives many excellent tips on the legal requirements involved in such arrangements, plus dozens of ways to get houses for less money. (Some of the ideas will be discussed in a second article next week in this same space.)

If opening a shop of your own is in the picture, you may be able to get a "house" in the process, practically free. Low-interest federal loans for renovating older commercial buildings are sometimes available, especially in historic districts.

Let's say you find a nice brick building for sale at $30,000 and it has a couple rooms for a "home" on the second story. Maybe you'll need an extra $10, 000 and lots of elbow grease to fix it up. But your payments for the store will be putting a roof over your head as well.

Better Homes and Gardens magazine occasionally features families who have home/business combinations and find it works perfectly well for those people who like city life.

Then again, maybe your dream is to start out in a new house with all-new plumbing, appliances, and kitchen cabinets.

Why not buy a piece of land and pay it off in three years?

Pay every dime you can get from bonuses, tax refunds, or other sources. Then get a loan for a no-frills house that can be upgraded in the years ahead.

You also can sell the land and use the money for a down payment on a house.

Buying land is one way to force yourself to build a nest egg. Land is expected to take a huge jump in value in the next few years. High interest rates shouldn't keep you from buying land because paying it off quickly will, in effect, lower the interest charges.

If you have almost no money for a down payment but you want to get into the housing market now, you still can find a way.

Occasionally, a seller will let you rent the house with an option to buy. The interest rate may go up during the delay period, but at least you will have the house at the lowest price it will ever be. Thus, this will help to offset the extra cost of the interest.

Work out the legal details ahead of time -- with some of the rent money going on the house (half, if possible). Get every point drawn up by an attorney, and get a real-estate expert to go over the agreement.

Try to put aside money during the "delayed closing" period -- which could be two years or more -- to help on the down payment.

If you should find a house which the seller needs to dispense with quickly, for any number of good reasons, you can often get him to carry a second mortgage. Don't be shy about asking because second mortgages are more and more the rule these days.

Should you own anything of value -- stocks your aunt left you, a piece of land, a boat, a car -- it doesn't hurt to make an offer of trade.

Money for a down payment might come from a credit union, borrowing on a life-insurance policy, or a loan from a relative.

Any way you cut it, you'll probably have to stretch yourself to handle the monthly payments for any house in today's market. Your old car may have to go a little bit longer, and that long-put-off vacation might have to wait even longer , but landing a good house is something you'll never regret.

It's a fact, your money will be well invested.

First of two articles on how to buy a house of your own despite sky-high prices. The second will appear one week from today in this space.m