Real Estate Financing - How To Buy a Home When You Have Bad Credit

If you have poor or bad credit it will make buying a home more difficult but definitely not impossible. Many other home buyers have done it. there are a few options you can think about what it comes to real esate financing.

You can ask the seller to carry the loan.  If the seller still owes money on the home you can check with your lender and see if you can get a wrap-around mortgage.  The wraparound mortgage will allow you to pay the monthly payment on the existing mortgage  and an additional payment to pay the difference-- the balance. Make sure that a wraparound mortgage will not trigger a due-on-sale clause, which requires the loan be paid off if the home is sold  - read the  fine print on the contract for the home. Wraparound mortgages are not legal in all states so check this out your real estate laws first.

Consider a lease-option on the property.  A lease-option on the real property will allow you to set a good purchase price now, then apply a portion of the rent each month toward your down payment. When the lease period ends, usually anywhere from 12- 36 months but most commonly 12 months, prices on homes should have increased and you'll have accrued equity without actual ownership. At the end of the lease-option period if you don't exercise the option- that means buy the property, then none of the monies that you have paid the seller will be returned to you. 

You can ask the seller if he will let you increase the price you are willing to pay the seller and have him credit the money back to you to be used for your down payment or for your closing costs.

As a last resort you can try borrowing money from your friends, relatives a pension plan or retirement plan to use or the down payment or help with closing costs. be careful, know what you can pay it back within a reasonable period of time.

If you do borrow money for a down payment it must be disclosed to the lender or if any of your money for your down payment was a gift, provide proof for it. 

If this type of real estate financing appeals to you then you have some good options if you have poor or bad credit and are turned down by the lending institutions.