7 creative ways to buy your first house

A pricey market poses big challenges for first-time buyers. Though some are daring, one of these options might be for you.
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By MP Dunleavey

So you want to buy a place of your own but can't figure out how to pull together the necessary cash and financing? If you're willing to think creatively, there are several offbeat ways to buy your first home.
The fixer upgrade
When you can't afford what you want, look for what you can afford and use it as a stepping stone.

Case in point: Jamie Carroll, 46, and her husband bought an $80,000 two-family house about six years ago. They renovated, sold it and invested in a $200,000 two-family place in a nicer town. In a few years, they'll repeat that process and buy their dream house in the woods of Massachusetts.

Their first house was far from ideal, but the down payment was only $5,000, and the rental income allowed them to pay for repairs without incurring more debt. After the sale, they walked away with more than $30,000. Ditto in their new home, but the rental income is higher, so they'll save more toward their next purchase -- enough so that they can buy the new house and keep the rental property as an investment.

Pros: There are plenty of lower-priced houses out there in need of repair, and the income from a tenant can help both with repair costs and mortgage payments. Even in overheated markets, there's little likelihood that the value of homes at the low end will suffer in a slump.

Cons: This method isn't for the impatient or the status conscious. To save money, the couple did many repairs themselves, and it will be almost 10 years before they can settle into their dream house. Just be careful not to buy a place where the cost of repairs will eat up any profits you might make when you sell.
The shared load
If buying your own property is prohibitive, consider buying into a dwelling with shared ownership. There are several options here, with varying levels of complexity and commitment. One of the most common uses a legal form of ownership called "tenants in common."

Case in point: In 1991, when the average San Francisco one-bedroom apartment was selling for about $250,000, freelance writer Sharon Fisher paid $170,000 for a one-bedroom in a tenants-in-common building with five other units. "I couldn't have bought real estate without this," she says.

Fisher eventually sold her TIC share for a tidy $420,000 when her building went condo. However, she says it would have sold for less if it had remained a TIC, and she would most likely have had to pay the buyer's legal fees.

Pros: Buying into a TIC is less expensive, and this form of joint ownership does a better job of protecting the rights of individual owners (as in the case of unmarried partners who want to buy property together).

Cons: Joining a TIC can be legally and financially complicated, and the details vary from state to state. Some TICs may restrict when you can sell and impose other conditions. And though you own your own place, you need people skills: Tenants negotiate noise, repairs, who puts out the garbage, etc.

Find out more about tenancy in common here.
The friendly option
If you don't want the legal hassle of setting up a TIC, it's possible to buy a property with a friend you trust, sharing the mortgage and the title. This form of ownership is called joint tenancy, and it's the way most married couples hold property.

Case in point: In 2003, Bryan, 34, bought a three-bedroom house with a buddy for $299,000. They each put down $10,000, and they rent out the third bedroom to a friend, which helps cover costs.

Pros: The two are only paying slightly more than they would in rent, while they're building equity and the house is appreciating.

Cons: The legal particulars of joint tenancy vary from state to state, so you'll need to check with a lawyer. Under joint tenancy in many states, any owner can force the sale of a house or transfer ownership rights without the permission (or even knowledge) of the other owners. The costs and all decisions about maintenance and financing are shared equally, which is fine so long as everyone agrees.