Dear Sue,
My wife and I bought our home in 2004. Because of declining home values we now owe more than our home is worth. In other words, we are upside down.
Our neighbor who lives just a couple of blocks away wants our home and we want his. We like his floor plan a lot better than ours. He has the extra garage we need and we have one too many bedrooms. Our neighbor bought his home around the same time we did and he put about the same amount down.
I have heard of trading equity but I have never heard of trading debt.  Is there any way we can trade houses? If so, how would we go about doing it?
Thanks for your help! 
— Trading Tom
Dear Tom,
Wow! The concept of trading debt is a new one. I believe that it can be done.
My suggestion would be to start with your respective lenders. Each lender would require that each of you qualify for each other’s loan. You will be required to go through a formal loan assumption process. That means providing two years of tax returns, W2s for income and proof of employment and current credit reports.
If each of you qualifies it should be a no brainer. Very creative of you!
With the current foreclosures, short sales and tight money, it is very important to be creative. Realtors need to think outside of the “lock box” in order to assist home buyers and sellers in this market. Utilizing available lending programs is not enough.
Trades are a great way to move up or on. If there is equity to work with, seller financing is a great option. This is when the home seller becomes the bank. The home buyer makes the down payment to the seller and the seller carries back the balance on a note at mutually agreed upon terms.
Home buyers looking for money now have fewer options since down payment assistance programs are becoming virtually non-existent.
Gifts from family members or early inheritance money should be a consideration. Some parents or grandparents would love to see their children or grandchildren enjoy their inheritance while they are still alive.
Individual retirement accounts (IRAs) are a good source for a down payment. Either through borrowing or the once-in-a-lifetime penalty free $10,000 withdrawal that the Internal Revenue Service allows.
Self-directed IRAs are an often overlooked source for buying real estate. A qualified self-directed plan will allow one to buy outright or finance the purchase with 30 percent down as long as the loan is a non-recourse loan.
A non-recourse loan is one where the lenders only recourse for non-payment is foreclosure.
Sell stuff. I have a client that is selling a horse trailer, horses and tractor to come up with a sizable down payment. Turn your stuff into an asset.
Equity share. Find a partner that will help with the down payment. Put them on title for an agreed upon percentage of the profits or losses after a specified period of time. The longer the time period the greater the chances of making a profit.
Credit unions are an affordable source for all kinds of loans including home loans. The credit union interest rates are often better than bank rates. It will pay to shop a local credit union.
Lease option or lease purchases are another possibility. This is where the home buyer leases the property for a set period of time. The time period is usually one to two years. A portion of the rent is often credited towards the purchase price.
When it comes time to exercise the option to purchase the buyer/tenant gets a loan and buys the property.
I am sure there are other ways to finance a new home. I look forward to hearing from my readers about alternative forms of financing that they may have come up with.
In today’s tight money market thinking outside the lock box is a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com, or on the Web at www.homedollarsandsense.com.