How To Buy A House With Bad Credit And Minimal Down Payment

By Simon Volkov

If you are wondering how to buy a house with bad credit, you’re not alone. Today’s real estate market offers more discounted property choices than ever before. In order to obtain the best price it is helpful to learn about different types of properties and the pros and cons of each.

The Internet is a great source for learning how to buy a house. Buyers can locate information about purchasing newly constructed homes, short sale real estate, bank owned homes, and repossessed properties sold through foreclosure auctions.

Another trustworthy source for obtaining reliable home buying information is real estate agents. Many realty agencies conduct seminars to help buyers determine which type of property is best suited for their needs. One area many realtors have entered into is foreclosure properties. Agents can help buyers locate exceptional deals on repossessed homes, as well as short sale properties.

Short sale homes refer to houses that have entered into foreclosure, but not yet reclaimed by lenders. When banks enter into short sale agreements they let borrowers list their home for sale for less than is owed on the mortgage note. These homes are often sold at 20- to 30-percent below market value to entice a quick sale.

Individuals who want to buy a house, but have poor credit may want to investigate creative finance options that allow them to obtain private financing. Some of the more popular options include lease purchase option agreements and seller carry back mortgages.

Lease options can be a good choice for individuals who cannot afford large down payments. This finance option involves leasing property for 1 to 2 years with a portion of rent payments contributed toward the purchase price.

Buyers provide a small down payment to sellers and enter into a lease contract. Some sellers will lock-in the purchase price when lease option contracts are drafted, while others require buyers to pay fair market value when the contract expires. Both parties must abide by state real estate laws, so it is best to obtain legal counsel to ensure lease purchase agreements are legally binding.

Lease-to-own gives buyers the opportunity to restore their credit while working toward buying the property. Once lease terms expire, buyers obtain a bank loan for the remaining balance. It is crucial for buyers to engage in credit repair strategies to ensure they can obtain financing at the end of the contract. Otherwise, they default on contract terms and could lose all funds vested into the property.

Seller carry back mortgages can also be beneficial for buyers with bad credit. This option requires sellers to act as the mortgage financier. In some cases, sellers offer partial financing and require buyers to obtain a bank loan for the balance.

Buyers typically provide a down payment to secure the property for sale. Loan installments are remitted to the seller. If bank loans are obtained, the lender carries the first mortgage and sellers carry the second mortgage. Seller carry back contracts usually extend for 3 to 5 years. Afterward, buyers obtain bank financing for the balance owed.

Last, but not least, buyers may qualify for financing through Fannie Mae Homepath Mortgage. This government sponsored program provides special financing options to buyers with bad credit, as well as real estate investors and buyers who are looking for discounted properties.

Fannie Mae Homepath properties consist of foreclosure homes that were either repossessed by lenders or returned to banks using deed in lieu of foreclosure. When properties are financed through Homepath Mortgage, buyers are only required to provide a 3-percent down payment and do not have to pay for mortgage insurance or property appraisals.

Another benefit of Fannie Mae properties is many homes qualify for government grants offered through HUDs Neighborhood Stabilization Program. NSP grant funds are offered to buyers who purchase homes in areas with high foreclosure rates. Funds must be used to purchase or rehabilitate properties.

These are just a few ways of how to buy a house with bad credit. Taking time to become educated about various types of properties and financing options can help buyers save thousands of dollars when buying a home.

About the Author: Understanding the intricacies of how to buy a house can minimize the stress often associated with homeownership. The more you know, the better decision you can make. Real estate investor, Simon Volkov offers an extensive home buying article library at SimonVolkov.com.

Source: isnare.com

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