Can I buy a home with no down payment and marginal credit? I have been working a good job for over two years. I had several years of a bad road earlier. Do you have any advice?
For any person to buy property without a down payment and good credit may be difficult to do. There are some circumstances that you can check out that may make it possible for you to own a home, says Montgomery.
3 possible solutions
- If you are a veteran, you may qualify for a home mortgage with no down payment and no private mortgage insurance (PMI). With a poor credit history, you may not be eligible, but it pays to seek out a mortgage broker that originates VA, FHA, HUD and USDA mortgage loans. They are all government agencies. There are private mortgage lenders that make low or no-down-payment loans to low credit score borrowers.
- Do you know a co-signer that will stand behind you? Typically, this would be a close friend, relative or occasionally an employer. Someone who knows you and believes you will honor your commitment.
- Find a property owner who will sell to you on a “land contract” with no down payment. These property owners may be tough to find, but they likely own property that is not well cared for, has been vacant for an extended period or property that has been on the real estate market for years. It is property neither they, nor anyone else wants; it scares buyers. You have to be handy and have the time and know-how to fix up the house. If you have a credible story and a plan laid out about how you will make the payments, it may be possible to find such a person.
Seek up-front advice
There are many credit counseling services such as the Consumer Finance Protection Bureau (a government agency) or NeighborWorks America that offer guidance and can help. Be careful, because not all organizations offering financial advice are created equal. A red flag may be a company that wants payment for fixing your credit. Before seeking a loan, consider first determining your current financial capabilities by visiting a credit counseling service, so you do not end up going down a bad road again.
Richard Montgomery is the author of “House Money — An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” Follow him on Twitter at @dearmonty.
