How to Buy a Home With Poor Credit

Poor credit will make buying a home more difficult - but not impossible. Here are some options you can consider.

Instructions

Difficulty: Moderately challenging

Things You’ll Need:

• Real Estate Attorneys
• Online Mortgage/finance Services

1. Ask the seller to carry the loan. If the seller still owes money on the home, you may be able to get a wraparound mortgage, which allows you to pay the monthly payment on the existing mortgage and an additional payment to cover the balance.
2. Pursue a lease-option. This will allow you to set the purchase price now, then apply a portion of the rent each month toward your down payment. At the end of the lease period, typically 12 to 36 months, prices should have increased and you will have accrued equity. Realize that if the option is not exercised, none of the monies that have been paid to the seller will be returned.
3. Increase the purchase price you are willing to pay to the seller, then ask the seller to credit that money back to you to be used for a down payment or for closing costs.
4. Borrow money from friends, relatives, a pension plan or a retirement plan to increase your down payment or help defray closing costs.

Tips & Warnings

• Money borrowed for a down payment must be disclosed to a lender. If any of your down payment was a gift, provide proof.
• Be prepared for a higher down payment and higher interest rate.
• Make sure that doing a wrap-around will not trigger a due-on-sale clause, which requires the loan to be paid off if the home is sold. Wraparound mortgages are not legal in all states.