Dear Monty: I have heard stories of people who have managed to buy a house with no money and no credit. Are there ways to buy a home with no down payment and no credit?
Response from Monty: We’ll assume you have a full-time job. For a person, buying a property without cash and without having good credit can be difficult to do. An important factor will be the reason why you have bad credit. Often there were events beyond the control of a borrower that created the problem. Here are some places to look for such a person, people or a mortgage company. This project may require considerable effort on your part. You sell against all odds. You may need to pitch several times before finding a taker for your proposal. Position your request as a business proposition. There are several options to consider.
# 1: If you are a veteran, VA loans do not require a down payment. An online search in your computer’s navigation bar will reveal mortgage lenders who advertise they specialize in low credit loans. A recent history of paying off your obligations on time for at least a year can go a long way in helping you find help.
# 2: FHA loans require a 3% down payment, lower interest rates, and better debt ratios. Customers can generally have a lower than average credit score and still be eligible for an FHA loan. Not all mortgage lenders make FHA loans. Prior to closing, there are loan requirements to be met in the FHA process, such as repairs, appraisals, and more. Some lenders are unwilling to invest more time or train originators to handle these loans.
# 3: Consider a crowdfunding website. Ask a friend to do this on your behalf. If your circumstances are compelling and warrant your position, make a plan to raise money to make a down payment. There are many such sites, one of which has a section for “basic needs”. Housing is a basic necessity.
# 4: Find a co-signer with money, good credit, and enough tangible assets that will support you as a co-signer. Typically this would be a close friend, relative, or sometimes an employer. Someone who knows you and believes you can and will honor your commitment.
No. 5: Find an owner who will sell you his property on a land contract with no down payment. These owners can be difficult to find. Still, I guess if you have a believable story and a plan for how you’ll make the payments, it’s possible to find someone like this. The best place to find these owners is the communal treasury office (tax collector). They will have a list of delinquent owners. Another good source is a real estate agent with access to the local multiple listings service. They can search for homes with extended periods on the market and homes that have been on the market for years.
If you can’t find a solution here, don’t give up. If you can take a part-time job or get a better paying job through specialized training, you’ve changed your situation. Many lenders will reopen the mortgage window for you in three to five years, possibly sooner.
Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home”. He advocates for industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com
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