In order to obtain a home mortgage through conventional lending institutions, borrowers must have a fico score of 750 or higher. Additionally, borrowers must exhibit a strong history of paying loans on time and a solid work history. Fortunately, financing alternatives are available for individuals with less-than-perfect credit.
One home mortgage option is known as seller carry back financing. Using this strategy, sellers act as the lender and personally finance all or a portion of the purchase price. Seller carry back mortgages typically extend for two to five years; giving borrowers time to clear negative credit. Once the contract expires, borrowers refinance the loan through a traditional lender.
Another home mortgage finance option is rent-to-own real estate. Buyers reside in the home and pay the property owner rent. A portion of rent money is contributed toward purchasing the house. Most sellers of lease to own properties require a 10- to 20-percent down payment. Contracts last between two and three years and help buyers establish a solid payment history.
Buyers engaging in seller carry back or lease to own transactions should have contracts reviewed by a real estate lawyer. Home mortgage contracts should include default clauses to protect both seller and buyer.
Buyers should make monthly payments via bank check. This will help expedite verification of payments when borrowers are ready to obtain home mortgage financing through a traditional lender. Paying with cash or money orders is strongly discouraged unless the seller provides notarized receipts.
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