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Is It Possible To Buy A House With No Money Down If I Have Bad Credit?

By Edited Jun 17, 2015 0 0

How Can I Buy A Home With No Money Down?

Yes it is possible to buy a home with no money down and even with bad credit.  People do it across America everyday. With times being as hard as they are still in 2012, people with bad credit still want a part of the American dream but they think disastrous credit histories and lack of funds will keep them from doing that.  The way subprime lenders have taken advantage of low income borrowers' need and desire to own a part of this American dream has left a bitter taste in most people's mouths and left people playing the blame game in an effort to explain why people who could not afford large mortgages were allowed to get a mortgage in the first place.

The problems isn't that people with low income were allowed to get mortgages, that's unfair because everyone should have a chance to own their own home.  The problem was that they were given mortgages with terms that their income levels could not sustain.  The subprime lenders who were doing this were not doing it because they cared about the individuals who were trying to get homes, they were in it for the money. Unfortunately, companies like ACORN who were doing a lot of good in the community for low income families who could not afford hefty home mortgages because a scapegoat during the 2008 presidential election and subsequently got chased out of business.

Fortunately there are still companies like NACA (Neighborhood Assistance Corporation of America) who are still trying to help low income families achieve the American dream.  With the NACA program however, you do need a down-payment, but they are a great program for low income first time home buyers who want to get started on the right foot.

With that being said, there are a few ways that you can buy a home with no money down.  The TV commercials that you see at night use one or a variation of these methods so there is no need to spend $49.99 to find out what you need to do.


Ways You Can Buy A Home With No Money Down Even With Bad Credit

For Sale By Owner (Land Contract)

Deal directly with the owner of the home.  Often, the owner is "motivated" to sell because they need money or the need to move right away.  These types of sellers is what you are looking for.  When you see a house "for sale by owner" call them up and ask if they are willing to sell you the home on a "rent to own"  or what is commonly called a "land contract" basis.  The contract will stipulate what is expected of each of you until the home official changes hands after payments have been satisfied.  You can also find good options for land contracts by looking for abandoned houses in your community and trying to find the owner.  Many people who look for make money finding properties for sale will often buy their homes using the land contract method.


Rent To Own Homes

There are many of these rent to own agencies popping up in low income communities.  These are homes purchased by investors who want to sell the homes but they will do it on a rent to own basis.  They make money whether you buy the house or not so for them it is a win win situation.  For you, just like in the in "For sale by owner" example, you get to try your hand out at owning a home before the sales process is complete.  You will get to see just how much it actually costs to own a home including rent/mortgage, repairs and upkeep. Before you get into a contract with these rent to own agencies, do research with the local county to make sure they actually own the home.  Sometimes, they themselves are in a "rent to own" relationship with the actual owner.  You don't want to get involved in that type of "rent to own" relationship.


Buy From A Friend or Relative

Buy a home from a friend or family member who is looking to sell.  It is easier to buy a house for $1 or set up a land contract situation with someone you know rather than going out to find strangers who are trying to sell their homes.  As long as you both honor your side of the contract, there are usually no problems and both sides are happy.


Buy A Home From A Public Auction

All across the country people are picking up houses at public auctions for literally pennies on the dollar.  In Detroit, Michigan for example, house in some neighborhoods are going for $5000.  There are places where you can get a house for less that $1000 at public auction. Many times these houses may need minor repairs but for the most part, they are in move in condition.  Check with your local Department of Housing to find out about housing auctions in your area.  They happen pretty regularly so if you miss one, just wait for the next and keep saving your money.


What Should You Consider Before Buying A Home With No Money Down?

The biggest mistake that people who bought homes from subprime lenders and suffered during this housing market plunge in 2008 is that they could not afford the homes they purchased.  Aside from those with huge balloon payments (which is just ridiculous for people who don't have money in the first place to have balloon mortgages), there are other factors:

People didn't have enough money saved for repairs, and emergencies they may need to do to their homes.  Owning a home is more than just paying the monthly mortgage. Before you own a home you also have to have a good amount in your savings to have in case you need to make repairs or address an emergent situation with your home.  Just roof replacement alone could cost you $20,000 depending on the damages.  Plumbing repairs could run anywhere from $1000 to $2,500 and up depending on the severity of the problem.  You have to have a savings to address these situations in your home.

People didn't have an emergency saving fund in case they lost their source of income.  You should have at least 3 months of mortgage payments saved and put aside just in case you lose your job.  Many people lost their job and had way of paying for their homes and living expenses because they didn't have adequate savings to address these issues.  Ideally, you should have at least 3 to 6 months of living expenses PLUS mortgage payment or rent saved just in case you lose your primary source of income. 

You have to make sure you are prepare to own a home.  So you don't fall victim to circumstance.  Also make sure the home you buy is within your income and that you can actually afford it.  If you can't afford to buy a home right now, be content with just renting until you are prepared for home ownership.

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