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2 Creative Financing Options To Help You Buy A Home Without Using Your Credit

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Having bad or no credit does not need to stop you from buying a home. Traditional bank financing is not the only options for you as a home buyer to get into a home., as there is no credit financing.  Here are some creative methods you can use to buy your next home without using traditional bank financing or relying on your credit to get a loan.

Lease Option

A lease option is a method you can use to buy a home without using your credit. It is necessary for you to look for a home seller that is willing to enter into this type of agreement with you, which will require them to hold onto the property as you buy the property from them over time. This method is similar to a rent-to-own where you lease the home for a period of time, then after the period of time you have the option of buying the home.

The price of the home is established when you sign the lease option agreement and your lease payments are also determined. You would also put down a sum of money as the lease option consideration when you sign the lease option contract. At the end of the lease period, you can look into getting bank financing to buy the property, as your credit may have improved, or you can extend the lease contract out further with the home seller.

For example, you enter into a lease option contract with a home seller to lease the home for $1000 per month for three years. You also agree to put down a lease option consideration or down payment of $5000 to secure your interest in the property. After the three years you will have the option to buy the property from the owners for $250,000, which is the market value of the property. You can also negotiate to have a portion of your $1000 lease payments to go toward the eventual purchase of the $250,000 price.

Seller Financing

With seller financing, the seller of the home acts as the bank in this agreement and takes payments from your over a period of time for the purchase of the home. Signing a purchase contract with the seller protects you and them during the purchase period, and if you default on the payments they would be able to foreclose on the property to take it back, just as a bank would. The contract indicates the payment amount and how long the loan is to be paid, which you can refinance with another mortgage company later on, as your credit improves.

It is important to make sure your payments go into an escrow account handled by a third-party escrow company to ensure the payments go to make the payment on any existing loan on the property. The escrow account will also distribute funds to pay for the property taxes and home owner's insurance. This ensure the seller of the home handles all obligations on the property before pocketing any of your monthly payments.

Use these two options to help you buy a home without having good credit.